Term
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Definition
| A peril is the actual cause of a loss (fire, windstorm, hail). |
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Term
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Definition
| A hazard is any condition that increases the possibility of a loss.1Physical Hazard-Any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it.2Moral Hazard-A condition of morals or habits that increases the probability of a loss from a peril.(intentionally damage to collect)3Morale Hazard-Hazard arising out of an insured's indifference to loss because of the existence of insurance. |
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Term
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Definition
| 1Pure risk-A situation where there is oly the possibility of loss;insurable.2Speculative Risk-A situation where either profit or loss is possible(betting, investing);not insurable.3Static Risk-Connected with losses caused by the irregular action of nature by the mistakes and misdeeds of human beings.similar to pure risk.4Dynamic Risk-Associated with a changing economy.ex.change in taste of consumers;not insurable.5Fundamental Risk-A risk that affects the entire economy or large number of persons or groups within the economy.ex.double digit inflation;not insurable.6Particular risk-A risk that affects only the individual and not the entire community or country.ex.theft. |
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Term
| RISK MANAGEMENT-5 METHODS OF MANAGING OR HANDLING RISK |
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Definition
| 1Avoidance-Avoiding the hazard.ex. if you don't want the risk of owning a car, you avoid owning a car.2Sharing a Risk-Common method of risk management by members of insurance pools.3Transfer of Risk-Most common method of handling risk. Involves transferring the risk to an insurance company in return for a premium charge.4Assumption of Risk (risk retention)-self insurance. ie. individual replaces own car.5Risk Reduction or Risk Control-Reducing risk via loss prevention methods. ex. installing a sprinkler system in a building |
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