Pennsylvania Property and Casualty questions & answers rated A+ 2024

Pennsylvania Property and CasualtyLoss control Refers to actions taken and strategies implemented to reduce the frequency or severity of a loss. Insurance companies commonly incentivize their customers to implement loss contras by offering discounts that reduce insurance premiums -insurers make loss payments to insureds when a-loss is experienced to satisfy their contractual obligation to indemnify insureds against covered losses. - insurance may be used to protect large purchases of real and personal property Risk The chance or uncertainty that a loss will occur Brainpower Read More Previous Play Next Rewind 10 seconds Move forward 10 seconds Unmute 0:02 / 0:15 Full screen Pure Risk The only type of risk considered to be potentially insurable Speculative risk Any kind of risk that could result in either loss or gain and is typically not insurable Loss Exposure The possibility of financial loss due to risk. The severity of an individual or entity's loss exposure increases or decreases depending on their habits, location, and many other characteristics Property Loss Exposure The possibility of loss to the value or usability of property or a physical, tangible asset. Liability loss exposure Loss resulting from injuries or damages the insured causes to another party as a result of negligence, requiring the insured to compensate the other party for the injuries or damages caused. Loss Any injury or damage suffered by the insured because of an accident or event covered under an insurance policy. Peril An event, situation, or circumstance that results in property damage or loss Hazard Condition, circumstance or situation that increases the chance of loss occurring or increases the severity of a loss. Insurance A means of managing financial risk by transferring the risk from one party to another through legal contract or other arrangement. - insurance spread the risk of loss from one person to another large number of persons through the pooling of premiums collected from the group as a whole. insurance policy The document that details the terms and conditions contained in a contract of insurance. Property and casualty insurance policies contain the following: -Declarations -Definitions -Insuring Agreement -Additional and Supplementary Coverages -Conditions -Exclusions -Endorsements indemnity Refers to compensation that is paid or promised to be paid to a party for losses that have already occurred or may occur in the future The principal of indemnity The purpose of an insurance contract is to make a policy whole again after a loss is experienced and that an insured may not profit from a loss Risk Retention When the person, business owner, or professional decides to retain part or all of an exposure to a given risk. This means that they will be fully responsible for any losses that occur regarding the retained risk Risk Sharing (risk distribution) When multiple entities form a group for the purpose of creating a plan where each group member pays into a fund to be used for anticipated future losses that any group member may experience Risk Avoidance When the person business owner or professional consciously seek to avoid or eliminate loss exposure to a specific type of risk Risk reduction When a person, business owner, or professional is making conscious effort to minimize the frequency or severity or losses Risk transfer The strategy of shifting the risk of potential losses to another party, typically through a formal contract and in the exchange for some form of compensation. Insurance is the most common risk transfer method used today. Elements of insurable risk -losses must be definite and definable -loss must be great enough to create a hardship for the insured -losses must not be completely catastrophic in nature (war or nuclear attack) -losses must be accidental -the insurance company must be able to calculate the chance of a loss occurring Adverse Selection Refers to situations where one party entering into a contract has more knowledge about the information relevant to the contract than the other Insurance Underwriting -is the process of assessing risks to determine if they are acceptable and if so how much premium will be charged by the insurance company for accepting the risk. Intended to avoid adverse selection and make certain insurers are fairly compensated for the actual risks they accept expose to when issuing insurance contracts Law of Large Numbers (spread of risk) Probability theory stating that as a sample size grows larger, the average of the sample results will begin to approach the expected value more closely. -the law or large numbers also applies to insurance . As an insurance company increases the number of policyholders it has issued policies to, it's estimated losses in the form of claims payments become closer to what is estimated or expected