Insurance Flashcards
(46 cards)
Risk
POSSIBILITY of loss:
-Exposure to germs viruses
-Becoming CFP (liability)
-Loosing job
-Owning real estate (like out lake lot)
-Our Trampoline
Peril
CAUSE of loss:
-Fire
-Windstorm
-Collision
-Theft
-If a kid breaks their arm on our Trampoline (liability)
Hazard
A Condition that may create or increase the chance of loss:
-Building on an Earthquake fault
-Poor Maintenance of a car’s brakes
-2 story dock vs 1 story dock on lake
Which of the following is an example of a hazard?
A. Wagering $100 on the outcome of Saturday’s game
B. Bringing a product to market
are speculative risks
C. Purchasing a House
D. The cause of a loss
E. Building home near a river
E. Owning a home near a river carries a physical hazard.
-Wagering $100 on the outcome of Saturday’s game
&
-Bringing a product to market
are speculative risks
Purchasing a house is a property risk.
Cause of loss is a peril
Law of large Numbers
‘doorknocking a ton of houses’
Adverse Selection
People that have the most risk want the most insurance
Morbidity
incidence and severity of sickness and accidents
Insurable Risks (what are they?)
-Must be sufficiently large number of units to make losses reasonably predictable
-The loss produced by the risk must be definite & Measurable
-The loss must be fortuitous or accidental
-The loss must not be catastrophic to the insurance company
What are the 4 elements of risk?
Law of Large Numbers, Adverse Selection, Morbidity, Mortality table
Which of the following are disadvantages of self-insurance?
Take a pic of ‘Applying the facts’ on page 1-4
Risk Control?
Risk Financing?
Risk Control:
-Risk Advance
-Risk diversification
-Risk Reduction
Risk Financing:
-Risk Retention
-Risk Transfer
Basic Rules of Risk Management p.1-4
-Coverage of potential catastrophes should be purchased first (life, disability, health, homeowners, and auto)
-SEVERITY is more important that probability
-High PROBABLIBILITY will mean high premiums or a decline of coverage by the carrier.
Coinsurance is a method of handling risk by ____________________.
Risk Retention
think: ‘I want to KEEP my coinsurance’
High limits of Insurance is a method of handling risk _____________________.
Risk Transfer
HSAs entail what risk management techniques?
-Risk Retention (the high deductible)
-Risk Transfer (is the insurance)
The handwritten box on pg.1-6
Draw out the box on pg. 1-6
A good rule of Risk Management is to
consider the potential amount of possible loss fist.
Large Loss exposures must be insured above all.
Principle of Indemnity
a principle underlying insurance contracts (other than life insurance) under which the insurer seeks to reimburse the insured for approx amount lost, no more and no less. (make whole)
The four principles supporting Indemnity
- Insurable Interest
- The concept of Cash Value
- Other insurance
- Subrogation
Insurable Interest
You must have insurable interest at the time of the loss
in property and casualty ins.
Life Ins must operate at time of issuance, but doesn’t need present at time of death
Contract Requirements
-agreement
-consideration ($)
-competency and be able to legally make the decision
-Must be for a lawful purpose
Adhesion (contract characteristic)
-Accept contract ‘as is’ or not at all
-typically the insured is favored of the insurer.
Aleatory Contract
‘roll the dice’ concept - don’t know which way it will go
Tort
At fault
