Nature Of Insurance

broadly defined as selection against the company. It includes the tendency of people with higher risks to seek or continue insurance to a greater extent than those with little or less risk; also includes the tendency of policyowners to take advantage of favorable options in insurance contracts.

any factor, condition, or situation that creates an increased possibility that a peril (a cause of a loss) will actually occur

similar objects of insurance that are exposed to the same group of perils.

attempt to return the insured to their original financial position.

a fundamental principle of insurance that the larger the number of individual risks combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period.

the unintentional decrease in the value of an asset due to a peril.

the risk of a possible loss.

a hazard brought on by the effect of personal reputation, character, associates, personal living habits, financial responsibility, and environment, as distinguished from physical health, upon an individual’s general insurability.

a hazard arising from indifference to loss because of the existence of insurance; often associated with having a careless attitude.

the immediate, specific event causing loss and giving rise to risk.

physical or tangible conditions existing in a manner that makes a loss more likely to occur.

a type of risk that involves the chance of loss only; there is no opportunity for gain; it is insurable.

the acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.

the uncertainty regarding loss, the probability of a loss occurring for an insured or prospect.

occurs when individuals evade risk entirely. It is the act of not doing something that could possibly cause a loss or the inactivity of participation in an event that may potentially cause a loss situation.

the process of analyzing exposures that create risk and designing programs to handle them is called risk management.

spread risk by sharing the possibility of loss over a large number of people. It transfers risk from an individual to a group.

takes place when the chances of a loss are lessened, or the severity of a potential loss is minimized.

the act of analyzing the loss exposure presented by a risk and determining that the potential loss is acceptable; often associated with self-insurance.

the act of shifting the responsibility of risk to another in the form of an insurance contract.

a type of risk that involves the chance of both loss and gain; it is not insurable.