Insurance

CONTENT

  1. Risks
  2. Insurance
  3. Perils
  4. Hazard

1. Risks There are basically two categories of risks: (a) pure or static risk and (b) speculative or dynamic risk

1(a). Pure or Static Risk

Pure (static) risk is a situation in which there are only the possibilities of loss or no loss, as oppose to loss or profit with speculative risk. The only outcome of pure risks are adverse (in a loss) or neutral (with no loss), never beneficial. Examples of pure risks include premature death, occupational disability, catastrophic medical expenses, and damage to property due to fire, lightning, or flood.

1(b) Speculative or dynamic risk


2 Insurance An agreement whereby one party undertakes to indemnify another party against loss by a specified peril (list below) in exchange for premium payment.

A Property, Casualty, Liability Insurance

  1. Individual, Homeowners (see Exhibit A below)
  2. Automobile, Recreational Vehicle
  3. Business
  4. Umbrella
  5. Commercial
  6. Umbrella
  7. Professional
  8. Directors and officers
  9. Workers’ Compensation and Employers Liability

B Health Insurance

  1. Hospital, surgical, physicians’ expense
  2. Major medical insurance
  3. Traditional indemnity
  4. Preferred provider organization (PPO)
  5. Health maintenance organization (HMO)
  6. Continuance and portability
  7. Medicare
    1. Part A
    2. Part B
    3. Part C
  8. Coverage
  9. Cost of coverage
  10. Taxation of premiums and benefits

C Disability Income
D Long-Term Care
E Life Insurance


3 Perils Cause of a loss.

    1. Fire or lightning damage
    2. Smoke damage
    3. Damage caused by explosion
    4. Glass breakage
    5. Windstorm or hail damage
    6. Damage caused by volcanic eruption
    7. Vehicle damage
    8. Aircraft damage
    9. Vandalism or malicious mischief
    10. Loss from theft
    11. Damage caused by riots or civil disturbance
    12. Freezing damage to plumbing, heating/air conditioning or household appliances
    13. Accidental discharge or overflow of water from plumbing or a heating/air- conditioning system
    14. Damage from sudden and accidental tearing apart, cracking, burning or bulging: heating, AC, sprinkler, water heating app
    15. Damage from a sudden and accidental discharge of an artificially generated electrical current
    16. Damage caused by collapse due to weight of ice, snow or sleet
    17. Falling objects

EXCLUDED from homeowners policies
Damage caused by flood
Damage caused by earthquake
Damage caused by earth movement
Damage caused by war or nuclear accident


4 Hazard A condition that may create or increase the chance of a loss arising from a given peril.

    1. Physical hazards refer to physical properties that increase the chance of loss from various perils. The retention of oil rags increase the peril of fire
    2. Moral hazard refer to the loss resulting from dishonest practice to defraud an insurance company. For example the intentional failure to remove snow from a roof increase the peril of “damage caused by collapse due to weight of ice, snow or sleet”
    3. Morale hazard results from the careless attitude of an insured party toward the occurrence of losses. For example leaving valuables in the front seat of car increase the peril “loss from theft”

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