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Cards In This Set
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Insurance transfers the risk of loss from an individual of business entity to an insurance company.,,
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Which in turn spreads the costs of an unexpected loss to many individuals.
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Insurable Interest
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The insured must have an insurable interest in the person or property covered by an insurance policy. This menas the insured would incur financial loss if the insured property was damaged.
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3 elements of insurable risk
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Financial (a monetary interest)
Blood (a relative) Business (a business partner) |
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Insurabe interest must exist at...
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...the time of loss
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Risk
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The uncertainty or chance of a loss occurring
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2 types of risk
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Pure risk - situations that can only result in a loss or no change
Speculative risk - involves the opportunity for either loss or gain - gambling - these types of risks are not insurable. |
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Perils are...
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The causes of loss insured against in an insurance policy
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Life insurance insures agains...
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The financial loss caused by the premature death of the insured.
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Health insurance insures against...
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The medical expenses and/or loss of income caused by the insured's sickness or accidental injury.
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Property insurance insures against...
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The loss of physical property or the loss of it's income-producing abilities.
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Casualty insurance insures against...
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Teh loss and/or damage of property and resulting liabilities.
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Hazards are...
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Conditions or situations that increase the probability of an insured loss occurring. Slippery floors or congested traffic are hazards.
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3 types of hazards
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Physical - those arising frm the material structural, or operational features of a risk
Moral - those applicants that may lie on an application for insurance Morale - an increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existence of insurance. |
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Indemnity
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Is a provision in an insurance policy that states that in the event of a loss, an insured or beneficiary is permitted to collect only to the extent of the financial loss.
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The purpose of insurance is...
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To restore, but not let an insured or beneficiary profit from the loss.
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