Insurance is defined as the transfer of what?
Insurance is defined as the transfer of risk to the insurance company in consideration for premium
The chance of loss without any chance of gain is called what?
Pure risk
What is speculative risk?
Speculative risk has the possibility for gain or loss and is not insurable.
What is risk?
Risk is the chance of loss.
A condition that COULD result in loss is known as what?
Exposure
What is a hazard?
A hazard is something that increases the chance of loss occurring.
What does the presence of a physical hazard increase?
It increases the chance of a loss occurring.
What is a peril?
A peril is a cause of loss, such as fire.
To be insurable, losses but be ________________ ?
Calculable
What does the law of large numbers do?
It allows insurers to predict claims more accurately.
Who does the law of large numbers apply to?
It applies to groups of people, not to individuals. The more people in the group, the more accurate the predictions are.
Why do most insurers buy reinsurance?
To protect themselves in the event of catastrophic loss.
Insurance laws (are or are not) required to be uniform from one state to another.
are not