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Chapter 1: Introduction To Life Insurance
Concept of Insurance
11
Insurance
Professional
02/11/2012

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Term
Definition of Insurance
Definition
Insurance is the transfer of risk from one party to another through legal contract or the transfer of risk through the pooling or accumulation of funds.
Term
Definition of Indemnity
Definition
Restoring an individual to the same or a similar financial position in which the existed prior to the loss.
Term
Definition of Risk
Definition
Uncertaintity or chance of financial loss.
Term
Definition of Pure Risk
Definition
Involves the chance of loss only, Pure Risk is the only type of risk that is insurable.
Term
Definition of Speculative Risk
Definition
Risk which involves an opportunity for gain that could result in loss. Example of Speculative Risk might be gambling.
Term
What is a Peril?
Definition
Peril is the cause of a loss.
Term
What is a Hazard?
Definition
Condition present that increases the chance of a loss occuring.
Term
What are the 3 types of Hazards?
Definition
Physical, Morale and Moral.
Term
What is a Physical Hazard?
Definition
Physical condition that increases chance of loss. Examples would be slippery floor, icy steps, faulty wiring, etc...
Term
What is a Moral Hazard?
Definition
Dishonest actions by policy owner/insured.
Term
What is a Morale Hazard?
Definition
Careless action such as driving under the influence, apathetic attitude, etc..
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