chapter 2 - Insurance contracts Flashcards
Categories of Risk
Personal Risk
Property Risk
Liability Risk
Personal Risk
the loss of ones health or life
Property Risk
financial loss .. when owned property is lost or damaged
Liability
peoples actions result in injury or damage to others
Ways of Dealing with Risk
Avoidance of risk
Controlling of risk
Retention of risk
Transfer of Risk
Avoidance of Risk
all chance of financial loss has been eliminated
NOT A PRACTICAL WAY
Controlling of Risk
measures to reduce the frequency and severity of losses
IE burglar and fire alarms do not always work
Retention of Risk
retention or self-insurance
Transfer of Risk
unable to withstand financial consequences of a potential loss
IE most popular and practical means of dealin with risk
Two types of risk
Speculative risk
Pure Risk
What is Speculative Risk
possibility of either financial loss or gain
Not Insurable
what is pure risk
involves the chance of financial loss with no
chance of any gain
Five elements of and Insurance Contract
Agreement
Consideration
Legality of Object
Legal capacity of Parties on Contract
Genuine Intention
What is the Agreement
consists of offer and unconditional acceptance of that offer
Define Consideration
An exchange of something of value between the parties
