Study 3 - Perils and Hazards

Risk

The chance of a loss. Specifically the possible loss or destruction of property or the possible incurring of a liability. Sometimes referred to as the subject of an insurance contract.

Named-Perils policy

A policy in which the perils insured against are listed, as opposed to ones that insures against “all risks”.

All-Risks Policy

The name given to an insurance policy that covers each and every loss except for those that are specifically excluded. If the insurer does not exclude it, then it is automatically covered. This is the broadest type of policy that can be purchased.

Specified Perils

perils insured against that are specifically named in a policy; losses resulting from the perils listed that are covered under the policy. This is the flipside of all risk coverage, where losses resulting from the perils listed are excluded.

Fire

Combustion manifested in light, flame, and heat for useful purposes (friendly fire) or destructive purposes (hostile fire)

Personal property

Legally, any property of an insured other than real property. More often used when referring to the ____________ of family members insured under a homeowners policy.

Real property

Land and any property that is tangible and usually fixed or attached to the land.

Theft

The wrongful taking of the property of another. It is a broad term and includes larceny, pilfering, hold up, robbery and pickpocketing.

Earth movement

a general term that includes earthquake, landslide, snowslide and volcanic eruption among other phenomenon.

Fluvial Flooding

The overflow of a river

Pluvial flooding

Flooding caused by rain.

Hazard

1) A risk or probability that an event insured against might occur. 2) A condition that engenders or increases the chances of a loss.

Physical hazard

A hazard arising from the physical condition or characteristics of the object that is insured.

Moral hazard

Hazard arising from the character, interest, habits, and lack of integrity of the insured or person concerned.

Morale hazard

A hazard that is based on the insured’s attitude towards the insured belongings. This hazard exists when the insured no longer cares about the possessions because they are insured.

Conflagration

1) A fire involving two or more risks or extending over a wide area. 2) any unusually large fire.

Sublimit

A limitation in an insurance policy on the amount of coverage available to cover a specific type of loss.