What is a risk?
The uncertainty surrounding either the likelihood or impact of an event.
What is a pure risk?
A risk in which none of the potential outcomes is beneficial. This type of risk can result only in either a neutral outcome or a negative outcome.
Ex. Fire, Accidents
What is a Speculative Risk?
the opposite of pure risks because, although they involve uncertainty, they include a chance of success or gain rather than just the chance of a negative or neutral outcome.
Ex. Gambling, investing
What is a loss?
A loss can be defined as an expense or a decrease in value.
What is a Direct Loss?
A direct loss involves tangible damage to people or property. Examples of direct losses include fire damage, flood damage, theft, and death.
What is an Indirect Loss?
An indirect loss is an extra expense or inconvenience that results from a direct loss.
Ex. Melanie’s home suffers fire damage, and she incurs the extra expense of renting a hotel room during repairs. The cost of the hotel room is an indirect loss.
What is an Exposure?
The possibility of a loss
What is an Occurrence?
The event that results in a loss
What is a Peril?
A peril is the result of a loss, in property insurance, perils include fire, flood, theft, and many others.
Peril Note
Insurance companies focus primarily on the risk of perils. Insurance policies either list the perils that can result in compensation after a loss or include sections explaining excluded perils.
When a peril is excluded from a policy, losses caused by it generally will not result in compensation from the insurer.
What is a named Peril?
a loss is only covered if it was caused by a peril specifically mentioned as a covered peril in the insurance contract. Most insurance policies for personal belongings are named-peril policies.
What is an Open Peril?
Covers losses caused by any peril unless the insurance contract specifically excludes it. These are often called all-risk policies. However, even open-peril policies contain lists of excluded perils.
What is proximate cause of loss?
the peril that logically led to a loss. This concept becomes important when multiple perils contribute to a loss or when one type of loss triggers another.
What is a Hazard?
A hazard isn’t the cause of a loss but something that increases its likelihood or scope. This can be important in insurance because someone who’s surrounded by too many hazards can struggle to find affordable insurance even if that person has no history of loss.
Physical Hazard
A physical hazard is an environmental factor or physical attribute that increases the likelihood or severity of a potential loss.
Ex. Wet floor
Moral Hazard
conditions that increase the temptation to cause a loss on purpose. The insurance community often carefully monitors these hazards, which have resulted in several long-standing industry practices.
Incurable Interest
a desire for a person or thing to remain unharmed. In property and casualty insurance, insurable interest must exist at the time of loss rather than merely at the time insurance is purchased
Morale Hazards
cases of indifference that make someone not care about preventing or reducing losses. These don’t involve deception or evil intent, but they foster an environment of irresponsible behavior.
Ex. upon believing that a neighborhood is very safe, Maria may leave doors unlocked and increase the likelihood of burglary.
What is a risk Matrix and what are the four categories of the Matrix?
A visual representation of what a certain risk overall threat is.
Low frequency and low severity
Low frequency and high severity
High frequency and low severity
High frequency and high severity
What are the four risk management strategies?
Risk avoidance
Risk retention
Risk reduction
Risk transfer
Risk Avoidance
a strategy where someone completely eliminates a risk by choosing not to engage in an activity. For instance, a person concerned about dying in a plane crash might refuse to fly.
Risk Retention
occurs when someone decides to accept a risk and live with any consequences. A classic example is choosing not to purchase collision insurance for an older vehicle and retaining the risk of potential damage.
Risk Reduction
involves taking steps to decrease either the frequency or severity of potential losses while acknowledging that the risk cannot be eliminated completely
Risk Transfer
happens when risk consequences move from one party to another. While this doesn’t eliminate the risk itself, it relieves the original party of certain responsibilities, allowing focus on other priorities.
Ex. Buying Inscurance
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Level 1 Chapter 129
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Level 1 chapter 236
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Level 1 chapter 351
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Level 1 chapter 442
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Level 2 chapter 120
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Level 2 chapter 229
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Level 2 chapter 360
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Level 3 chapter 116
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Level 3 chapter 278
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Level 3 chapter 336
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Level 4 Chapter 134
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Level 4 chapter 2 Business Interruption Insurance38
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Level 4 Chapter 3 Marine Insurance19
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Level 4 chapter 4 Assorted Commercial Property Products56
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Level 5 Chapter 1 Personal Lines Casualty Insurance103
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Level 5 chapter 2 Assorted Personal Lines Casualty Products17
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Level 6 Chapter 1 Commercial Lines Casualty Insurance90
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Level 6 Chapter 2 Commercial General Liability Insurance48
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Level 6 chapter 3 Employment Practices Liability Insurance29
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Level 6 chapter 4 Workers' Compensation and Employers' Liability Insurance66
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Level 6 chapter 5 Professional Liability/Errors and Omissions Insurance35
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Level 6 Chapter 6 Cyber Insurance36
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Level 6 Chapter 7 Miscellaneous Casualty Insurance Products45
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Level 7 chapter 1 Texas Laws and Rules107
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Level 7 Chapter 2 Texas Laws and Rules (Property and Casualty)101
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Missed information32
