FBLA insurance and risk management

Risk Management

a systematic process of identifying, analyzing and responding to projected risks

Pure Risk

risk in which the any outcomes are loss or no loss; personal, property, liability

Personal Risk

a risk that directly affects an individual

Property Risk

the possibility of financial loss occurring as the result of owing a real estate invesment

Liability Risk

the threat of the company of individual having to bear the consequences of the damage

Speculative Risk

a situation that holds out the prospects of loss, gain or no loss no gain; common in businesses, both profit and loss possible

Peril

probable cause that exposes a person or property to the risk of damage, injury or loss, and against which an insurance cover is purchased

Direct Loss

loss which flows directly from the unsecured peril

Indirect Loss

loss that arises because of a prior occurrence of another loss

Extra expenses

expenses that occur because of any loss that would not have been necessary without the loss

Particular Risk

a risk that affects only on an individual and no everybody in the community

Fundamental Risk

risk which is non-discriminatory in its attack and effect; considered a group risk, not individual

Dynamic Risk

risks brought about by changes in the economy

Static Risk

risks that involve losses brought about by irregular action of nature by dishonest misdeeds and mistakes of man

Objective Risk

defined as relative variation of actual loss from expected loss

Subjective Risk

defined as uncertainty based on person's mental condition or state of mind

Hazard

Condition or situation that creates or increases chance of loss in an insured risk

Physical Hazard

a physical condition that increases the chance of loss

Moral Hazard

dishonesty or character defects in an individual that increases severity or loss

Morale Hazard

carelessness about a loss because of the existence of insurance

Legal Hazard

increases the likelihood and severity of a loss due to a condition imposed by the legal process that forces an insurer to cover a risk that it would otherwise deem uninsurable

Insurance

a practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium

Deductible

the initial amount you pay on an accident to get insurance and reduce premium

Disability Insurance

provides payments to employees who are unable to work for an extended period due to serious illness or injury

Liability Insurance

covers you when you do something to someone else

Business Operations

coverage as results of accidents, injuries, and property damage

Term Life Insurance

affordable and flexible, provides coverage for a specified length or term

Permanent Life Insurance

provides coverage for the duration of your life

Whole Life Insurance

permanent insurance, where premiums remain the same through the life of the policy with a portion invested

Universal Life Insurance

similar to whole life, but more flexible with amount of premiums and death benefit adjustment

Variable Life Insurance

allows you to make decisions about where money gets invested

Survivorship Life Insurance

insures both you and your spouse under one policy, with the proceeds payable after the second death

Joint Life Insurance

covers both spouses or multiple business partners. It pays out when the first person on the policy dies (which is where its alternative name of "first to die life insurance" comes from)

Convertible Life Insurance

allows you to convert to a different policy at the end of the term

Key Man Life Insurance

life insurance on the key person in a business.

Liability Coverage

legally required for drivers in almost every state, includes Bodily Injury and Property Damage coverage, which pay for someone's medical expenses, personal injuries, and property damage if you're at-fault

Collision Coverage

If you hit something like another vehicle or a fixed object like a guard rail, lamp post, or telephone pole, helps pay for the damages to your car

Comprehensive Coverage

If your car is broken into, or dented in a hail storm, would help cover the losses to your car

Uninsured/Underinsured Motorist Coverage

It provides Liability (Bodily Injury and Property Damage) coverage for you, if an uninsured or underinsured motorist is at fault in an accident

Medical Payments

If you or anyone in your car is ever hurt in an accident, can pay for their medical expenses.

Personal Injury Protection

It can help pay for medical and rehabilitation expenses, work loss, funeral costs, and even replacement services

Family Auto Policy (FAP)

Covers everyone in the car, 3 numbers: One to one person, one for whole family, and one for property

Personal Auto Policy (PAP)

For owners of private passenger vehicles, Combines physical damage insurance on the automobile with liability insurance for claims from use of the auto

Negligence

the failure to exercise the required amount of care to prevent injury to others

Imputed negligence (vicarious liability)

the principal is responsible for the acts of his agents

Contributory negligence

negligence that is caused by both plaintiff and defendant

Comparative negligence

allows the plaintiff to collect some damages, but it will be reduced by the amount by which the plaintiff contributed to his own injury

Unilateral contracts

only the insurer makes a legally enforceable promise to pay for covered losses

Conditional contracts

if the insured fails to pay the premium, or fails to abide by the contract, then the insurer is not obligated to pay for any of the insured's losses

Aleatory contracts

characterized by unequal consideration, insurance company only has to pay if certain events occur

Indemnity contracts

insurance company is only required to compensate for actual losses, up to the policy limits

HO-1

basic form homeowner; covers damage caused by fire, lightening hail and a number of other perils; defaults for vacant properties

HO-2

broad form, perils policy, specifically covers perils enumerated in the policy and no others, more comprehensive coverage than HO-1

HO-3

insures the described owner-occupied dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use

HO-4

an insurance policy that covers tenants from loss of personal property

HO-5

comprehensive form, open perils policy, personal property, most comprehensive coverage and the most expensive

HO-6

covers the interior of the unit and personal property inside-commonly known as "studs in" or "walls in" coverage.

HO-7

essentially the same as an HO-3, but is designed specifically for mobile or manufactured homes, which don't fall under regular homeowners insurance coverage

HO-8

is designed to address specific concerns with coverage for older homes

domestic insurer

insurer is one formed under the laws of this state

foreign insurer

one formed under the laws of any state, other than this state

alien insurer

one formed under the laws of any country other than a state of the United States

Comprehensive coverage (auto insurance)

insurance company pays for damage to your auto caused by an event other than a collision

warranty

a promise by the insurance applicant to do certain things or to satisfy certain requirements, or, it is a statement of fact that is attested by the insurance applicant

affirmative warranty

is an acknowledgment or affirmation by the insured as to the credibility or verification of certain facts or conditions pertinent to the issuance of the policy

promissory warranty

is a statement about future facts or about facts that will continue to be true throughout the term of the policy

express warranty

is a seller's promise or guarantee that a buyer relies on when they purchase an item

implied warranty

Under a sales contract, whether written or oral, there is a guarantee that the item sold is merchantable and fit for the purpose intended.

disability insurance

offers income protection to individuals who become disabled for a long period of time, and as a result can no longer work during that time period

presumptive disability insurance

to protect against drastic disabilities that occur suddenly

temporary disability insurance

as a physical or mental disability which hampers your discharging of responsibilities for a short period of time; provides some job protections for persons who must take time off for medical reasons

total disability insurance

designed to help take the pressure off you financially if you suffer an illness or injury that leaves you totally and permanently disabled

unilateral contracts

s a legally enforceable promise - between legally competent parties - to do or refrain from doing a specified, legal act or acts. In a unilateral contract, one party pays the other party to perform a certain duty

personal contracts

It can describe a contract that binds only a single individual as opposed to a group or company that the person represents. It can also refer to a contract that only binds the single person and not their heirs, successors, or assignees

contracts of adhesion

the company and its agent has the power to draft the contract, while the potential policyholder only has the right of refusal; he or she cannot counter the offer, or create a new contract for the insurer to agree to

risk manager

specialize in identifying potential causes of accidents or loss, recommending and implementing preventive measures, and devising plans to minimize costs and damage should a loss occur, including the purchase of insurance

actuary

a business professional who analyzes the financial consequences of risk; use mathematics, statistics, and financial theory to study uncertain future events, especially those of concern to insurance and pension programs

underwriter

process of determining risk for potential clients

loss control engineer

involves identifying the sources of risk, and is accompanied by either voluntary or required actions that a client or policyholder should undertake in order to reduce risk

misrepresentation

A false or misleading statement that, if intentional and material, can allow the insurer to void the insurance contract

domestic insurer

means an insurer formed under the laws of this state

alien insurer

means an insurer formed under the laws of any country other than the United States of America or a state thereof

captive insurer

generally defined as an insurance company that is wholly owned and controlled by its insureds

foreign insurer

insurer formed under the laws of a state other than this state

two major categories of auto insurance

liability and automobile

auto insurance coverage

your insurance generally covers the costs of repairs, legal fees and medical coverage for those who suffered injuries in the accident. Insurance policies also cover costs incurred when your car is stolen or vandalized

property damage liability coverage

covers the cost of damages to someone else's property after an accident you cause

bodily injury liability coverage

the part of your insurance policy that pays for the costs associated with injuries to the other person or people involved. This coverage also provides a legal defense in the event that you are sued for damages

uninsured motorist coverage

protects you if you're in an accident with an at-fault driver who doesn't carry liability insurance

underinsured motorist coverage

steps in when you're in an accident with an at-fault driver whose liability limits are too low to cover the damage or medical expenses

reinsurance

occurs when multiple insurance companies share risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would experience in case of disaster

COBRA insurance

a federal law which helps employees maintain health care coverage when they would otherwise lose it from a "qualifying life event," including resigning from a job or filing for unemployment

Broker

sells, solicits, or negotiates insurance for compensation

independent agent

typically represent a number of insurance companies, or "carriers", and sell the products that most appropriately meet the needs of their clients; can sell the policies of many different companies

direct writer

an insurance company that doesn't have independent representatives to write their business. Their employees or contracted sub-0contractors the only ones who write and service your policy

exclusive agent

are contracted to sell policies for a single insurance company

Medicare

Medicare is the federal health insurance program for people who are 65 or older, certain younger people with disabilities, and people with End-Stage Renal Disease

Medicaid

a jointly funded, Federal-State health insurance program for low-income and needy people. It covers children, the aged, blind, and/or disabled and other people who are eligible to receive federally assisted income maintenance payments

emergency fund

money set aside to help you cover unexpected expenses

readjustment period fund

used to cushion the immediate lifestyle adjustment that your family must make if you died