FBLA Insurance and Risk Management 1 – Flashcards
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Liability insurance
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Covers you when you do something to someone else
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Risk
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Uncertainty about the outcome of an event
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Speculative Risk
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Gain as well as loss is present
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Pure Risk
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Only possibility for loss occurs
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Risk Management
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Process of identifying purely risky situations to determine and implement appropriate management
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Exposures
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sources of risk
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Peril
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Any risk than can cause a financial loss
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Loss Frequency/Loss Severity
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how often a loss occurs; how destructive it is
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Risk Avoidance
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Most effective way of handling risk
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Risk Retention
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Simply accepting a risk
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Loss Control
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Reduces severity and frequency of loss (Locks on a door, smoke detectors)
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Risk Transfer
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Reimbursement for a loss Insurance
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Risk Reduction
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More insurance, the less a loss will be
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Large Loss Principle
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Helps implement risk management program Insure major losses, accept the minor ones
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Insurance
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Mechanism for reducing pure risk through which a large number of individuals share in financial losses suffered by members as a whole
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Premium
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A member's share of the insurance, what you pay
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Hazard
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Any condition that increases the probability a peril would occur
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Moral Hazard
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When you want a peril to occur so you can collect insurance money
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Morale Hazard
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You dont care about peril
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Physical Hazard
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Something about you makes you more susceptible to peril
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Fortuitous loss
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A loss that happens suddenly
