Insurance

Speculative risk

Events in which a person has both the chance of winning or losing are classified as

Restores an insured person to the same financial state as before the loss

In case of a loss, the indemnity provision in insurance policies

The cause of loss insured against

Peril is most easily defined as

Law of large numbers

state that the larger the number of people with a similar exposure to loss, the more predictable actual loss will be.

Insurable interest

the insured would incur a financial loss if the insured property was damaged.

Perils

are the causes of loss insured against in an insurance policy.

Pure risk

A situation in which a person can only lose or have no change represents

Larger

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Physical, moral, and morale

Hazards are classified as

Financial, blood, and business

The 3 elements of insurable risk are:

Speculative risk

involves the opportunity for either loss or gain.

Hazards

are conditions or situations that increase the probability of an insured loss occurring.

Proximate cause of loss

direct loss also includes other damage where the insured peril was the

Moral hazard

hazards refer to those applicants that may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.

Subrogation

is the insurer's legal right to seek damages from third parties, after it has reimbursed the insured for the loss.

Pure risk

refers to situations that can only result in a loss or no change.

The insured cannot collect but the mortgage holder will still be paid

The insured has violated the contract without the knowledge of the mortgage holder. After a loss

Insurance

What do individuals use to transfer their risk of loss to a larger group?

Insurance

transfers the risk of loss from an individual or business entity to an insurance company, which in turn spreads the costs of unexpected losses to many individuals.

Peril

A tornado that destroys property would be an example of which of the following?

Risk

is the uncertainty or chance of a loss occurring.

Subrogation

The transfer of an insured's right to seek damages from a negligent party to the insurer is found in which of the following clauses?

any condition or exposure that increases the possibility of loss

With respect to the business of insurance, a hazard is

Accident

a sudden, unplanned and unexpected event, not under the control of the insured, resulting in injury or damage that is neither expected nor intended.

Morale hazard

hazard refers to an increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existence of insurance.

Pure risk and speculative risk

The risk of loss may be classified as

Conditions

hazards and may increase the chance of a loss occurring.

At time of loss

Insurable interest in the property covered in a policy must be proven

Loss

Insurance is a contract by which one seeks to protect another from

Physical hazard

those arising from the material, structural, or operational features of the risk, apart from the persons owning or managing it.

Indemnity

(reimbursement) is a provision in an insurance policy that states that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract.

Nothing

An insured carries a property policy on her home in the amount of $250,000. A bank is shown as the mortgagor in the policy. Last month the insured made her final mortgage payment, but did not remove the bank from the policy. In the event of a covered loss to her home, how much will the bank receive?

Law of large numbers

Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

occurrence

losses caused by continuous or repeated exposure to conditions resulting in injury to persons or damage to property that is neither intended nor expected.