Understanding Risks and Hazards in Insurance

These flashcards cover key concepts of risks and hazards in insurance, including definitions of different types of risks and hazards that affect insurability.

Pure risk

Type of risk that only involves the chance of loss, and is insurable.

Speculative risk

Type of risk where a person can either win or lose, such as gambling.

Hazard

A condition or action that increases the probability of loss.

Physical hazard

A tangible hazard that can be seen and touched; e.g., smoking increasing health risks.

Moral hazard

Related to an individual’s morals, such as dishonesty on an insurance application.

Morale hazard

Relates to a person's mindset; indifference to loss due to having insurance.

Apparel

A cause of loss that leads to a reduction in the value of the insured person or property.

Loss

The reduction in the value of a person or property insured in a policy.

Insurance

The coverage provided to protect against losses.