FBLA Insurance and Risk Management

Flashcards covering key concepts and vocabulary in Insurance and Risk Management.

Physical Hazard

A condition that increases the frequency of loss.

Moral Hazard

Dishonesty that increases the risk of loss.

Morale Hazard

Carelessness that increases the risk of loss.

Legal Hazard

The legal system that may increase the frequency of loss.

Pure Risk

A type of risk that may result in either a loss or no loss.

Speculative Risk

A type of risk that may result in either profit or loss.

Diversifiable Risk

Risk that affects only individuals or small groups.

Nondiversifiable Risk

Risk that affects the entire economy or large numbers of people.

Enterprise Risk

All major risks faced by a firm, including pure, speculative, strategic, operational, and financial risks.

Financial Risk

Risk associated with changes in commodity prices, interest rates, foreign exchange rates, and the value of money.

Direct Loss

Financial loss that results from the physical damage, destruction, or theft of property.

Indirect (Consequential) Loss

Loss that results indirectly from a direct physical damage or theft.

Self-Insurance

A planned retention strategy where a firm funds part or all of a given loss exposure.

Fortuitous Loss

A loss that is unforeseen and unexpected by the insured.

Indemnification

Restoration of the insured to their approximate financial position after a loss.

Adverse Selection

The tendency of individuals with a higher-than-average chance of loss to seek insurance at standard rates.

Underwriting

The process of selecting and classifying applicants for insurance.

Liability Insurance

Insurance that covers the insured's legal liability arising from property damage or injury.

Workers Compensation Insurance

Covers workers for job-related accidents or diseases.