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11 Cards in this Set
- Front
- Back
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Direct Physical Loss |
A loss which damage occurs as the result of an occurrence without an intervening cause. Ex: hail damage to the roof of a house. |
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Indirect/Consequential Loss |
A loss in which damage occurs as the result of a direct loss. Ex: the insured's increase in expenses when required to stay in a hotel because their damaged home cannot be lived in. |
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Risk |
1- The property or party that is insured. 2- The uncertainty of loss. |
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Pure Risk |
Situations that involve only the chance of loss or no loss such as property ownership. |
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Speculative Risk |
Situation that involves the chance of either a loss or a gain, such as gambling. |
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Exposure |
The condition of being at risk for financial loss due to hazards or unforeseen events. |
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4 Types of Hazards |
1- Physical: created by the use, condition, or occupancy of property. Ex: damaged steps or worn tires. 2- Moral: created by insured's habits such as dishonesty or criminal activity. 3- Morale: created by attitudes of the insured Ex: leaving house unlocked. 4- Legal: created when legal authority in situation is unclear or unsettled. Can arise from changes in law or from court rulings. Ex: a change in building code. |
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Peril |
The cause of a loss or the event insured against. Ex: Fire, lightning, theft, etc. |
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Accident |
Unforeseen, unintended event that is identifiable as to time and place. |
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Occurrence |
An accident, including continuous and repeated exposure to conditions, that causes bodily injury or property damage neither expected nor intended by the insured. |
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Methods of Handling Risk |
1- Avoidance: refrain from engaging in activity that might give rise to risk. Ex: not owning or driving a car to avoid the risk of an accident. 2- Retention: assume responsibility for loss. (Most common) Ex: deductibles or choosing not to purchase insurance. 3- Sharing: spreading risk among several entities or large number of people. Ex: insurance companies or physicians. 4- Reduction: decrease the chance for loss by removing or reducing hazards. Ex: wearing safety goggles or installing safety railings. 5- Transfer: shift the risk for loss from one party to another. Ex: purchase insurance policy or issuance of another contractual agreement. |
