Chapter 25 introduction to risk management

Insurance company

Business that issues policies of insurance.

Insurance interest

Any interest in life or property that would result in a financial loss.

Risk management

An organized strategy for protecting assists to help reduce financial loss.

Pure risk

There is always a chance of loss if certain events(perils) occur with this.

Risk assumption

You self-insure or pay for losses personally.

Risk reduction

You take measures to lessen the frequency or severity of losses that may occur.

Policy

A written insurance contract.

Risk

The possibility of loss.

Premium

The fee or ____ is paid by the policy holder.

Indemnification

Putting the policyholder back in the same financial condition as before a loss.

Probability

The mathematics of chance or the likelihood of an event occurring.

Property risk

The possibilities of loss or harm to real property.

Personal Risk

Potential losses involving income and standard of living.

Liability Risk

Both income and assets are protected from____arising out of errors or negligence.

Speculative Risk

There may be either a gain or loss.

Risk avoidance

Occurs when you avoid situations that involve substantial risk.

Exclusion

Specific losses that an insurance policy doesn't cover.

False

Most people have little need for any type of insurance.

True

Insurance companies collect premiums with the expectation that only a few policyholders will experience financial loss.

True

insurance companies added premiums based on statistical probability.

False

The higher the probability of an event occurring, the lower the premium for insuring against it

True

Exclusions are circumstances or losses not covered by the terms of an insurance policy.

False

An unearned premium is not refunded to the policyholder.

False

Risk management is a plan for buying insurance for every type of peril that could occur.

False

All risks have the same priority because they result in the same financial losses.

True

To shift or transfer risk, you buy insurance.

True

Increasing deductibles will reduce insurance premiums

Actuary

One who calculates premiums and dividends.

Beneficiary

The person who receives proceeds of a policy.

Claim

A request for payment for a loss.

Hazard

Defective wiring in a house is an example of a

Peril

The cause of possible loss.

Deductible

Specified amount subtracted from covered losses.

Perils

Fires, storms, explosions, and accidents are examples of

Personal

Potential losses involving your income and standard of living are called_____risk.

Speculative

Risk that may involve a gain or loss.

Risk reduction

Taking measures to lessen the frequency of severity of losses.