Category: Principles_of_Insurance

  • Insurance Principles Questions and Answers

      1. Match each word below with its appropriate definition. 1. Risk –———           A. Increases the chance of loss 2. Insurance        ——-   B. A means of transferring the riskof loss 3. Peril        ————    C. The chance of loss 4. Hazard ————– D. The cause of loss 2. Which of the following represent pure risks? A. […]

  • Insurance Principles Questions and Answers

      1. Match each word below with its appropriate definition. 1. Risk –———             A. Increases the chance of loss 2. Insurance         ——-   B. A means of transferring the riskof loss 3. Peril        ————          C. The chance of loss 4. Hazard ————–       D. The cause of loss 2. Which of the […]

  • The difference between a peril and a hazard

     Other Insurance terms Peril You’ve learned that risk is the uncertainty of loss. A peril is the cause of loss. Fire and collision are both examples of perils Hazard Now that you understand the difference between risk and peril, let’s discuss another important term: hazard. A hazard is anything that increases the  chance of loss […]

  • Identify factors that determine whether a risk is insurable

      elements of Insurability   Pure Risk, Speculative Risk Although theoretically almost anyone could purchase insurance to cover almost any risk, there are certain rules that establish a practical basis regarding who can be insured and for what. For instance, insurance cannot be used to handle speculative risks. Spec- ulative risks are risks in which […]

  • Describe how the law of large numbers is used by the insurance industry

      LAW OF Large numbers Overall, we’re a pretty safe group of people. Everyone doesn’t have a loss all the time. For this reason, by predicting the number of losses that will occur, an insurance company can provide large amounts of insurance for relatively little money. To help them predict their losses accurately so they […]

  • Explain the basic purpose of insurance

        Insurance You learned that one way of managing risk is to transfer it. This is what insurance does. The purpose of insurance is not to avoid or eliminate risk but to transfer risk.  To see how it works, let’s look at the hypothetical town of Middlefield. Middlefield has 200 homes, each worth $100,000. […]

  • Define risk and describe various methods used to manage risk

    Risk, exposure To understand what insurance is and how it works, you must first under-stand something about risk. Risk means the same thing in insurance that it does in everyday language. Risk is the chance or uncertainty of loss. For instance, the possibility that your house might be burglarized or that you might be hit […]