Principals And Practices Of Insurance

Front 1

Insurance definition

Back 1

A contract in which one party, the insurer, for monetary consideration agrees to reimburse another, the insured, for loss or liability for a loss on a defined subject caused by specified hazards or perils.

Front 2

Risk

Back 2

The chance of loss, specifically, the possible loss or destruction of property or the possible incurring of a liability. Sometimes referred to as the subject of an insurance contract.

Front 3

Speculative risk

Back 3

An insurance term for a situation where the possibility of either a financial loss or a financial gain exists, such as in purchasing shares, or betting on horses. Speculative risk is usually not insurance, unlike pure risk.

Front 4

Pure risk

Back 4

A situation involving a chance of a loss, or no loss but no chance of gain.

Front 5

Give an example of speculative risk

Back 5

A typical business operation is a speculative risk. The business ability of the owner and economic conditions in general will determine whether there is a profit or loss.

Front 6

Which form of risk is insurable and why?

Back 6

Pure risk as there is a chance of loss and no chance of profit.

Front 7

What are 3 Types of insurable risks

Back 7

Personal risks, property risks and liability risks

Front 8

Define Personal risk

Back 8

Personal risks encompass the chance of loss arising from a persons own bodily injury, loss of life or loss of income because of the following : death, physical disability (resulting from sickness or accident), old age, unemployment

Front 9

Define Property risks

Back 9

Property risks encompass the chance of loss arising from the destruction of or damage to property. Losses are of two types: direct losses (damage to or destruction of the property insured) and indirect loss ( loss that occurs because of direct losses)

Front 10

Name 3 classes of insurance

Back 10

Personal a lines ( an individual and their property)

Commercial lines (stores, businesses)

Special risks (marine exposure, aviation, high risk industrial)

Front 11

Peril

Back 11

The event that caused a loss covered by the policy (fire or windstorm)

Front 12

Burglary

Back 12

Unlawful removal of property from premises involving visible forcible entry.

Front 13

Robbery

Back 13

Unlawfully taking another’s property, in the persons presence by violence or the threat of violence.

Front 14

Theft

Back 14

The wrongful taking of the property of another.

Front 15

What is Boiler and machinery insurance

Back 15

Coverage against loss caused by equipment breakdown and malfunction, as well as sudden explosions arising from the ownership, use, and operation of boilers, pressure vessels and machinery.

Front 16

Negligence

Back 16

Failure to use the degree of care expected from a reasonable and prudent person.

Front 17

Hazard

Back 17

A risk of probability that the event insured against might occur. A condition that engenders or increases the chances of loss.

Front 18

Physical hazard

Back 18

A hazard arising from the physical condition or characteristics of the object that is insured( using and storing volatile materials and substances on premises)

Front 19

Moral hazard

Back 19

A hazard arising from the character,interest, habits and lack of integrity of the insured or person concerned ( failure of individuals to pay bills on time)

Front 20

Proximate cause

Back 20

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would have not happened.

Front 21

Proximate cause

Back 21

A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would have not happened.

Front 22

Remote cause

Back 22

A cause that is not the proximate cause of loss and is separate from the proximate cause in a chain of events leading to a loss.

Front 23

Immediate cause

Back 23

A cause that is not the proximate cause of loss but is the last link in a chain of events leading to a loss.

Front 24

2 components of the objectives of risk management

Back 24

Pre loss objectives (those met before a loss)

Post loss objectives ( those to be met after a loss occurs)

Front 25

Surety bond

Back 25

A contract under which one party ( the surety) guarantees the performance of certain obligations of a second party ( the principal) to a third party ( the obligee)

Front 26

Avoidance

Back 26

A risk management technique whereby the risk of loss is prevented by not engaging in activities that prevent the risk.

Front 27

Risk transfer

Back 27

For a non insurance company, that risk insured. For an insurance company, the risk reinsured.

Front 28

Risk retention

Back 28

For a non insurance company, the risk is not insured or self insured. For the insurance company the risk is not reinsured.

Front 29

Self insurance

Back 29

A means of assuming and managing risk by setting aside a pool of money that will be used for compensation in the event of a loss occurring.

Front 30

Captive insurance company

Back 30

An insurance company that provides insurance to and is controlled by its owners.

Front 31

Current expensing

Back 31

Losses are paid from current funds.

Front 32

Unfounded reserves

Back 32

An account is designated to pay for losses.

Front 33

Funded reserves

Back 33

Money is set aside to pay for losses.

Front 34

Barrowing

Back 34

Money is borrows to pay for losses.

Front 35

Captive insurer

Back 35

The company operates its own insurer.

Front 36

Hold harmless agreement

Back 36

An agreement that allows one party to protect another pArty against any future losses or claims that may result from a particular activity. Also known as an indemnity agreement.

Front 37

Premium

Back 37

The price of insurance protection for a specified risk for a specified period of time.