Missouri Property and Casualty Insurance Verified Answers
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Missouri Property and Casualty Insurance Verified
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Missouri Property And Casualty Insurance Verified
Missouri Property and Casualty Insurance Verified Answers
Risk and Exposure - Risk: The chance or uncertainty of loss. - Exposure: A condition or situation that presents a possibility of loss.
Ways to Manage Risk
1. Avoid Risk: Eliminating activities that carry risk.
2. Control Risk: Implem...
Missouri Property and Casualty Insurance Verified Answers
Risk and Exposure
- Risk: The chance or uncertainty of loss.
- Exposure: A condition or situation that presents a possibility of loss.
Ways to Manage Risk
1. Avoid Risk: Eliminating activities that carry risk.
2. Control Risk: Implementing techniques to limit the severity of losses.
3. Retain a Risk: Accepting the risk and dealing with any resulting loss.
4. Transfer a Risk: Shifting risk to another party, commonly through insurance or contractual agreements
like hold harmless agreements.
Definitions
- Hold Harmless Agreement: A contractual arrangement relieving one party from liability.
- Purpose of Insurance: To transfer risk from individuals or organizations to an insurance company.
Elements of Insurability
- Pure Risk: Risks that involve the possibility of loss only.
- Insurable Interest: A financial stake in the property or situation insured.
- Definite: Risks must be clearly defined in terms of time and circumstances.
- Unexpected: Risks should not be foreseeable as a certainty.
- Financial Hardship: The potential loss must lead to financial difficulty for the individual involved.
- Calculable: The risk must have an assignable financial value.
- Affordable: The cost of coverage needs to be within the consumer's financial reach.
- Losses Predictable: There should be enough similar risks in a population for predictions to be made.
- Adequate Spread of Risk: The risk should not affect a large group of insured individuals at the same
time.
, Peril and Hazard
- Peril: The specific cause of loss.
- Hazard: Anything that increases the chance of loss.
- Physical Hazard: Arises from the condition, occupancy, or use of property.
- Morale Hazard: Careless actions that increase risk.
- Moral Hazard: Intentional actions to create a loss for insurance benefit.
Contract Basics
- Contract: A legal agreement between competent parties.
- Elements of a Valid Contract:
- Competent Parties: Parties must have legal ability to enter a contract.
- Legal Purpose: The contract's intent must not violate the law.
- Offer and Acceptance: One party must propose an agreement and the other must accept.
- Consideration: Something of value must be exchanged.
Insurance Contract Principles
- Principle of Indemnity: Restoring an individual to their financial state before the loss, without profit.
- Aleatory: Dependent on an uncertain event, yielding unequal value transfer.
- Adhesion: Contracts where one party has more power in drafting.
- Doctrine of Reasonable Expectations: Contracts should meet the average person's expectations of
coverage.
- Unilateral Contract: One party (insurer) is bound to uphold the agreement upon payment of premiums.
- Contract of Utmost Good Faith: Assumes honesty and integrity from both parties.
Parts of the Insurance Contract
1. Declarations: Basic information about the insured and coverage.
2. Insuring Agreements: Specifies the losses covered.
3. Conditions: Responsibilities of both insurer and insured.
4. Exclusions: Defines what is not covered.
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