Unit 1 Arkansas Insurance
insurance - answer transfer of risk from a person or business to an insurer
Risk - answer uncertainty/possibility of a loss
Types of Risk - answer Speculative and Pure
Speculative Risk - answer A chance of loss, no loss, or gain. not insurable
Pure Risk - answer chance of loss only; insurance companies will insure
Exposure - answer possibility that a loss will occur
Examples of Exposure - answer Auto Accident; Luggage lost on a trip; Pet biting a
mailman; Employee hurt on the job; House fire
Peril - answer cause of loss
Example of Peril - answer House burns down; peril is fire
Direct - answer Physical Loss
Indirect - answer consequence of the direct loss
Hazard - answer increases the chance of loss
Types of Hazards - answer Physical, Moral, Morale
Physical Hazard - answer the hazard can be seen
Moral Hazard - answer Dishonesty
Morale Hazard - answer carelessness
STARR (methods of handling risk) - answer Sharing
Transfer
Avoidance
Retention
Reduction
Contract (Policy) - answeran agreement between the insured and the insurer
