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| chance or uncertainty of loss. For instance, the possibility that your house might be burglarized or that you might be hit by a car while crossing the street represents uncertainty of loss. Both are risks. |
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| a condition or situation that presents a possibility of loss. For example, a home that is built on a flood plain is exposed to the possibility of flood damage. |
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| you can avoid the risk of being in an auto collision by never getting into a car. |
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| For example, training workers in the safe use of welding tools can curtail the frequency of fires on the job. Risk control techniques that curtail loss frequency come under the heading of |
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| if any loss occurs, they will pay for it themselves |
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| This option includes, but is not limited to, insurance. For example, a hold harmless agreement may shift liability from an owner or contractor to a tenant or subcontractor. |
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| contractual arrangement where one party assumes the liability of a situation and relieves the other party of responsibility |
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| the more examples used to develop any statistic, the more reliable the statistic will be. |
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| are risks in which there exists both the possibility of gain and the possibility of loss. A poker game is an example of a speculative risk |
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| involve only the possibility of loss |
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| cause of loss. Fire and collision are both examples of perils. |
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| hazard is anything that increases the chance of loss |
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| a hazard that arises from the condition, occupancy, or use of the property itself. An example of a physical hazard is a skateboard left on the porch steps. |
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| . This means that an individual, through carelessness or by irresponsible actions, can increase the possibility for a loss. An example of a morale hazard is a person who drives a car carelessly because he knows a loss will be insured if an accident occurs |
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| legal agreement between two competent parties that promises a certain performance in exchange for a certain consideration |
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| what are the 4 parts of a contract? |
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| competent parties, legal purpose, offer and acceptance, consideration |
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| what is consideration in a contract? |
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| Consideration is a thing of value exchanged for the performance promised in the contract. With insurance, the consideration that the insured gives is the premium payment. The consideration that the insurer gives is the promise to pay for certain losses suffered by the insured. |
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| The principle of indemnity |
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| . The principle of indemnity states that when a loss occurs, an individual should be restored to the approximate financial condition he was in before the loss, no more and no less |
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| which means it is contingent on an uncertain event (a loss) that provides for unequal transfer of value between the parties. An insured can pay premiums for many years without having a covered loss. On the other hand, insureds who suffer a loss often get a great deal more from the insurance company than they’ve paid in premiums |
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| we mean that one party has greater power over the other party in drafting the contract |
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| What are the 5 parts to a policy? |
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| declarations, insuring agreements, conditions, exclusions, and definitions. |
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| The company is in the business to sell insurance to the insured. Profits attributed to the operation of the company are returned as dividends to the stockholders, not the insureds. |
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| In a mutual company, the insureds are also owners of the company. As owners, they can vote to elect the management of the company. Profits are returned to the insureds in the form of dividends or reductions in future premiums. |
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| In a sense, all members insure each other and share the losses with each other. A reciprocal is managed by an attorney-in-fact who is empowered to handle all of the business of the reciprocal |
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| It is a voluntary association of individuals, or groups of individuals, who agree to share in insurance contracts. Each individual, or “syndicate,” is individually responsible for the amounts of insurance they write |
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| fraternal benefit society. |
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| A fraternal benefit society is an incorporated society or order, without capital stock, that is operated on the lodge system and conducted solely for the benefit of its members and their beneficiaries and not for profit. Fraternals offer insurance that is available only to their members. Most write only life and health insurance. |
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| residual market insurance. |
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| The government sometimes steps in to provide insurance that is not ordinarily available from private insurers. |
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| loss ration= incurred losses divided by earned premiums |
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| expense ration= underwriting expenses/written premium |
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| sum of loss and expense ration |
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