Term
| What is the difference between risk and chance? |
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Definition
| Risk implies doubt about the outcome in a given situation, put the outcome is with risk is negative, a loss might occur. Change also implies doubt about the outcome in a given situation but the difference is the outcome is normally a favorable one to us. |
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Term
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Definition
| Risk implies some form of uncertainty about an outcome in a given situation. An event might occur and if it did the outcome might not be favorable to us. The possibility of loss. |
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Term
| Explain how uncertainty is related to risk |
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Definition
| Uncertainty implies doubt about the future. It is based on a lack of knowledge. The basis of risk is lack of knowledge. If we always knew what was going to happen there would be no risk. We operate in an uncertain or risky environment. |
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Term
| Define peril. Name two examples. |
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Definition
| A peril is an event that will give rise to a loss. ex. Flood, theft, fire, storm, accident and vandalism are all perils. |
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Term
| Define Hazard. Give two examples. |
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Definition
| Hazard is a factor which may influence the outcome of a loss. Hazards are not the cause of the loss, but they can increase the likelihood of a peril operating. ex. Wet floors(someone could slip and fall), flammable debris piled near the furnace in the basement will provide ready fuel should a spark escape, poorly maintained heating and air conditioning systems, use of damaged extension cords and overfusing are hazardous conditions and are more likely to result in a fire. |
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Term
| Define Hazard. Give two examples. |
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Definition
| Hazard is a factor which may influence the outcome of a loss. Hazards are not the cause of the loss, but they can increase the likelihood of a peril operating. ex. Wet floors(someone could slip and fall), flammable debris piled near the furnace in the basement will provide ready fuel should a spark escape, poorly maintained heating and air conditioning systems, use of damaged extension cords and overfusing are hazardous conditions and are more likely to result in a fire. |
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Term
| Give examples of personal risks to which individuals are exposed to. |
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Definition
Personal risks are based on the loss of life or loss of income arising from premature death, physical disability, old age or unemployment.
ex. If you become injured or ill and could not work for an extended period of time or ever again how would you surive?
ex. If you die prematurely as a result of an accident how would your family survive.
ex. if you lost your job |
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Term
| Give examples of personal risks to which individuals are exposed to. |
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Definition
Personal risks are based on the loss of life or loss of income arising from premature death, physical disability, old age or unemployment.
ex. If you become injured or ill and could not work for an extended period of time or ever again how would you surive?
ex. If you die prematurely as a result of an accident how would your family survive.
ex. if you lost your job |
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Term
| Give examples of property risks to which individuals are exposed to. |
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Definition
These risks arise from property we own.
ex. clothes, stereo, car |
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Term
| Give examples of liability risks to which individuals are exposed to. |
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Definition
These risks arise out of our obligation to other people.
ex. If we inadvertently cause injury to others or damage to their property we can be held responsible.
ex. if we own or occupy a premise we are responsible to keep them safe.
ex. If our children or pets cause damage to someones property we could be held responsible. |
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Term
| Give examples of personal risks to which businesses are exposed to. |
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Definition
Personal risks for businesses arise of of being unable to manage the business.
ex. Loss of life or injury to a business owner will prevent them from overseeing their business.
Also the risk of not being able to fulfill the role as a business shareholder.
ex. Loss causing death, disability, or sickness to one of the shareholders can leave them unable to contribute in their role. The other shareholders will be forced to continue without them, and the business will suffer. |
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Term
| Give examples of property risks to which businesses are exposed to. |
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Definition
Risk of a peril damaging business property.
Ex. Businesses are subject to many perils. Property damaged must be restored or repaired, which could be financially devastating.
Risk of not paying bills.
Ex. If an incident causes a business interruption and there is no income, bills will not be paid. Things like heat, water, electricity, mortgage and taxes still need to be paid even the business is not operating. |
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Term
| Give examples of property risks to which businesses are exposed to. |
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Definition
Risk of a peril damaging business property.
Ex. Businesses are subject to many perils. Property damaged must be restored or repaired, which could be financially devastating.
Risk of not paying bills.
Ex. If an incident causes a business interruption and there is no income, bills will not be paid. Things like heat, water, electricity, mortgage and taxes still need to be paid even the business is not operating. |
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Term
| Give examples of liability risks to which businesses are exposed to. |
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Definition
Risk of occupancy of premises.
Ex. If a customer experiences personal injury at the business site, it could prove costly if he or she decides to sue.
Risk of products manufactured.
ex. If products cause personal injury to customers, it could prove costly to the business.
Risk of employee injury.
ex. Employees could be hurt while operating on the job. |
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Term
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Definition
Speculative risk exists where there is either a chance of loss or a chance of profit. There are two possible outcomes:gain or loss. Such risks are not insurable.
ex. A wager on a throw of dice or any other form of gambling could have a good or bad outcome.
ex. A student does not study has the possibility of failing the exam as well as passing |
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Term
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Definition
Pure risk entails the chance of loss but no chance of profit. There are two possible outcomes, we may suffer a loss or there is no change in our existing condition.
ex. If we leave our cars unlocked we may return to find them as we left them or we may not. |
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Term
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Definition
| The minimization (at a minimum cost) of the detrimental effects of risk by identifying the risk, measuring the risk and controlling the risk. |
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Term
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Definition
| Insurance is the undertaking by on person to indemnify another person against loss, or liability for loss with respect to risk, peril to which the object o the insurance may be exposed or to pay a sum of money or other thing of value upon the happening of a certain event. |
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Term
| How does insurance provide security? |
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Definition
.by indemnifying loss
.insureds do not have to worry about facing financial hardship
.insured will only suffer a minor inconvenience and mental aggravation following a loss |
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