Idaho Law and Ethics Flashcards
Risk
Uncertainty about whether a loss will occur
Loss
Reduction of quality, quantity or the value of something.
Hazard
A condition that increases the probability or severity of a loss
Peril
A cause of potential loss - Fire, Wind, Flood, Theft or Sickness, Injury
Speculative Risk
Gain, Break-even, Loss
Owning a business, gambling, stock market
Pure Risk
No possible gain. Break-even or loss.
Property ownership, liability, exposure, living
Risk Management Tool: Avoidance
Elimination of any risks, sell property, withdraw from any activity that may cause loss
Risk Management Tool: Reduction
Containment or isolation of the hazard that may cause loss. (Safety devices, proper nutrition, stop smoking)
Risk Management Tool: Retention
That portion of the risk that can’t be avoided after all efforts to reduce or loss. Cash or asset reserves, suffer loss without replacement
Risk Management Tool: Transfer
Shifts the responsibility for loss from one party to another. Purchase insurance or a hold harmless agreement.
Insurable Interest: 3 Elements Must Exist
- Face personal risk of loss.
- Have a financial interest in what is being insured.
- No potential for gain to the insured.
Loss Ratio
Dividing losses by the total premiums
4 Elements of a Contract
- Offer and Acceptance: A meeting of the minds that the contract is now in force
- Consideration: An exchange of value- money, an act, a promise or giving up a legal right
- Competent Parties: Must be able to legally enter into a contract
- Legal Purpose
Concealment
Failure to disclose all material facts. Can void the contract.
Misrepresentation
A false statement of a material fact. A lie. Can void the contract.
