Chapter 21: Introduction to Risk Management – Flashcards

Unlock all answers in this set

Unlock answers
question
Pure Risk
answer
A chance of loss with no chance for gain
question
Insurable Risk
answer
A pure risk that is faced by a large number of people and for which the amount of the loss can be predicted
question
Insurance
answer
A method of spreading individual risk among a large group of people to make losses more affordable for all
question
Insurable Interest
answer
Any financial interest in life or property such that, if the life or property were lost or harmed, the insured would suffer financially
question
Personal Risk
answer
The chance of loss involving your income and standard of living
question
Property Risk
answer
The chance of loss or harm to personal or real property
question
Liability Risk
answer
The chance of loss that may occur when your errors or actions result in injuries to others or damages to their property
question
Economic Risk
answer
May result in gain or loss because of changing economic conditions
question
Speculative Risk
answer
May result in either gain or loss; not accidental or random
question
Hedging
answer
Making an investment to help offset against loss
question
Actuarial Table
answer
A table of premium rates based on ages and life expectancies
question
Actuary
answer
A specialist in insurance calculations and statistics
question
Beneficiary
answer
Sums of money to be paid for specific types of losses under the terms of an insurance policy
question
Cash Value
answer
The amount of money payable to a policyholder upon discontinuation of a life insurance policy
question
Claim
answer
A policyholder's request for reimbursement for a loss under the terms of an insurance policy
question
Coverage
answer
Protection provided by the terms of an insurance policy
question
Deductible
answer
The specified amount of a loss that the policyholder pays before the insurer is obligated to pay anything; the insurance company pays only the amount in excess of the deductible
question
Exclusions
answer
Specified losses that the insurance policy does not cover
question
Face Amount
answer
The amount stated in a life insurance policy to be paid upon death
question
Grace Period
answer
The additional time after the premium due date that the insurer allows the policyholder to make the payment without penalty (usually 30 days)
question
Hazard
answer
A condition that creates or increases the likelihood of some loss; for example, defective house wiring can increase the likelihood of a fire
question
Insurance Agent
answer
A professional insurance salesperson who acts for the insurer in negotiating, servicing, or writing an insurance policy
question
Insured
answer
The person or company protected against loss (not always the owner of the policy)
question
Insurer
answer
The insurance company who provides insurance coverage for a policyholder
question
Loss
answer
An unexpected reduction in value of the insured's property caused by a covered peril; the basis of a valid claim for reimbursement under the terms of an insurance policy
question
Peril
answer
An event whose occurrence can cause a loss; people buy policies for protection against such perils as a fire, storm, explosion, accident, or robbery
question
Probability
answer
The mathematics of chance or statistical likelihood that something will happen
question
Proof of Loss
answer
The written verification of the amount of a loss that must be provided by the insured to the insurer before a claim can be settled
question
Standard Policy
answer
The contract form that has been adopted by many insurers, approved by state insurance departments, or prescribed by law (modifications are made to suit the needs of an individual)
question
Unearned premium
answer
The portion of a paid premium that the insurer has not yet earned because the policy term has not ended; the unearned premium is returned to the policyholder when a policy is cancelled
question
Indemnification
answer
The process of putting the policyholder back in the same financial condition he or she was in before the loss occurred
question
Risk Management
answer
An organized strategy for controlling financial loss from pure risks
question
Risk Shifting/Risk Transfer
answer
Occurs when you buy insurance to cover financial losses caused by damaging events, such as fire, theft, injury, or death
question
Risk Avoidance
answer
Lowers the chance for loss by not engaging in the activity that could result in the loss
question
Risk Reduction
answer
Lowers the chance of loss by taking measures to lessen the frequency or severity of losses that may occur
question
Risk Assumption
answer
The process of accepting the consequences of risk
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New