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LM Chapter 1

Principles of Insurance

The chance or uncertainty of loss Risk
A condition or situation that represents a possibility of loss Exposure
Type of risk where you can avoid the risk of being in an auto collision by never getting into a car. Avoid
Type of risk where workers are trained in safe adn responsible practices Control
When a loss occurs and they pay for it themselves Retain a risk
The best way to transfer risk Insurance
To help them predict their losses accurately so they can charge the proper premiums need to accumulate adequate funds insurance companies rely on this Law of large numbers
Risks in which there exists both the possibility of gain and the possibility of loss Speculative risk
Risk in which there is only the possibility of loss Pure risk
Before someone can benefit from insurance they must have a chance of financial loss or financial interest in the propert. This is called what? Insurable interest
Elements of Insurable risk (7) Definite, Unexpected, Large enough, Calculable, Affordable, Predictable, Spread of risk
This is a cause of loss Peril
This is anything that increases the chance of loss Hazard
Type of hazard that arises from the condition, occupancy, or use of the property itself. Physical hazard
Type of hazard that arises when an individual through carelessness or by irresponsible actions can increase the possibility for a loss Morale hazard
Type of hazard that arises when a person might create a loss situation on purpose just to collect from the insurance company Moral hazard
Created by: landonhill