prinipals of insurance

Question	Answer
peril	cause of loss
risk	chance of loss
hazard	increases the loss
physical hazard	hazard that arises from the condition occupancy or use of the property itself EX skateboard left on the steps
morale hazard	an individual through careless or irresponsible actions can increase the possibility of a loss EX drives car carelessly without a seatbelt because they know they will be insured if accident occurs
moral hazard	a person might create a loss just to collect from the insurance company EX faked a theft of an older car so he can collect and buy a new one
avoid risk	never getting into a car
retain risk	if a risk ever occurs they will pay for it themselves
transfer risk	like buying insurance
control risk	installing a sprinkler system in the building in case of a fire
law of large numbers	the law of large numbers says that the more examples use to develop the more reliable the statistic will be
pure risk	loss only
speculative risk	gain and loss
insurable interest	Have a chance of finical loss or interest in the property You have insurable interest in your house not your neighbors
spread of risk	instead of insuring every person in town a company will want to insure several people in many towns the greater spread of risk the less likely that there will be a catastrophic loss for the insurance company

Resource summary

	Created by auktobherrhianne almost 9 years ago