Studied by 3 peopleRisk 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
Note
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