+
Related Flashcards
Related Topics
Cards In This Set
| Front | Back |
|
Insurance
|
A contractual coverage binding the insurer to indemnify the insured against a specified loss in return for money (premium)
|
|
Law of large numbers
|
The bigger the observed sample, the more accurate the predicted results
|
|
Indemnification
|
Concept of restoring individuals to the same financial position they were at before a loss occured
|
|
Risk
|
The probability or uncertainty that a loss will occur
|
|
Pure risk
|
Risk involving the probability or possibility of loss with no chance for gain; insurable
ex. homeowner wanting to guard against a possible house fire
|
|
Speculative risk
|
Risk for which it is uncertain whether the final outcome will be a gain or a loss; uninsurable
ex. gambling
|
|
Elements of insurable risks
|
*due to chance *measurable/predictable *can apply law of large numbers *selected from a diverse, randomly selected pool of insurable risk
|
|
Risk avoidance
|
Not engaging in the action that gives rise to the risk
|
|
Retention
|
Nothing is done about the risk; the individual will be totally responsible for paying losses
*most common method of handling risk
|
|
Transfer
|
Shifting the risk from one party (the insured) to another (the insurer) for a consideration or premium
|
|
Risk sharing
|
Spreads risk among several entities
|
|
Risk reduction
|
Decreasing the chance of loss by removing or reducing hazards that might cause an accident to happen
|
|
Exposure
|
Measure of vulnerability to loss, usually expressed in dollars or units, to which an insurance rate is applied
|
|
Hazards
|
Conditions that increase risk or the chance of loss occuring
|
|
Physical hazard
|
Material or structural problems such as damaged steps or worn out auto tires
|
