Flashcards in Chapter 2 Vocab (Text) Deck (23):
the tendency of persons with a higher-than-average chance of loss to seek insurance at standard (average) rates, which if not controlled by underwriting, results in higher-than-expected loss levels
broad field of insurance that covers whatever is not covered by fire, marine, and life insurance
Refer to property and casualty coverages for business firms, nonprofit organizations, and government agencies
The amount needed to pay all expenses, including commissions, general administrative expenses, state premium taxes, acquisition expenses, and an allowance for contingencies and profit.
cover loss caused by the dishonest or fraudulent acts of employees, such as embezzlement and the theft of money
A loss that is unforseen and unexpected by the insured and occurs as a result of chance
The insured is restored to his or her approximate financial position prior to the occurrence of the loss
Inland Marine Insurance
covers goods being shipped on land, which includes imports, exports, domestic shipments, and instrumentalities of transportation
The pooling of fortuitous losses by transfer of such risks to insurers, who agree to indemnify insureds for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk
Law of Large Numbers
The greater the number of exposures, the more closely will the actual results approach the probable results that are expected from an infinite number of exposures
covers the insured's legal liability arising out of property damage or bodily injury to others; legal defense costs are also paid.
pays death benefits to designated beneficiaries when the insured dies.
Ocean Marine Insurance
covers ocean-going vessels and their cargo from loss or damage because of perils of the sea
refers to coverages that insure the real estate and personal property of individuals and families or provide them with protection against legal liability
The spreading of losses incurred by the few over the entire group, so that in the process, average loss is substituted for actual loss
indemnifies property owners against the loss or damage of real or personal property caused by various perils, such as fire, lightning, windstorm, or tornado
an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance
Requirements of an Insurable Risk
includes pooling of losses, payment of fortuitous losses, risk transfer, indemnification
A pure risk is transferred from the insured to an insurer, who typically is in a stronger financial position to pay the loss than the insured.
government insurance programs with certain characteristics that distinguish them from other government insurance plans
provide for monetary compensation in the case of failure by bonded persons to perform certain acts, such as failure of a contractor to construct a building on time
refers to the process of selecting and classifying applicants for insurance