TX General Lines Property and Casualty Agent Exam Prep risk - Correct Answers ✅"chance of loss" to insured person, property, or activity this uncertainty of loss is the basic reason for insurance's existence loss - Correct Answers ✅unwelcomed/ unplanned reduction in economic value role of insurance is to indemnify the insured for the financial value of an insured loss direct loss- immediate result of event caused by covered peril indirect loss- remote ramification than direct loss, but still results of loss from covered peril ex) If a home is severely damaged by fire, the damage to the building is considered a direct loss. Because the home is temporarily uninhabitable the home owner will incur additional living expenses, over and above the home owner's normal expenses, until the house has been repaired. These additional living expenses are an indirect loss that follows the direct loss of the home. 1 / 4
TX General Lines Property and Casualty Agent Exam Prep exposure - Correct Answers ✅state of being subject to possible loss ex) motorist exposed to risk of being involved in auto accident that could result in damage to the car, serious injury, lawsuits, or even death
- measured by assigning exposure units (influenced by
- more exposure units, higher premium
insured item's market value and risk factors facing it)
- exposure: total extent of risk an insurer faces with an
insured ex) insurance company that sells workers compensation insurance faces increased exposure as an insured business's workforce increases peril - Correct Answers ✅destructive event that insurance guards against
ex) covered perils: fire, explosion, windstorm, flood, theft,
collision (insurance policy provides financial protection against these losses) 2 / 4
TX General Lines Property and Casualty Agent Exam Prep insurance policy provides financial protection against losses caused by specified perils --> covered perils hazard - Correct Answers ✅increases likely occurrence of peril or severity of a loss
moral hazard: traits of individual that increase chance of loss
- ex) alcoholism, smoking, bad credit
morale hazard: individual tendencies that arise from state of
mind, attitude, or indifference to loss -ex) driving recklessly
physical hazard: physical conditions that increase chance of
loss -ex) dangerous conditions/activities, diseases, unsanitary conditions, congested traffic, unguarded premises, etc.
legal hazards: legal or regulatory environment characteristics
that affect an insurer's ability to provide insurance at a premium that fairly reflects loss exposures risk management - Correct Answers ✅process of dealing with risk 3 / 4
TX General Lines Property and Casualty Agent Exam Prep
- risk avoidance
- risk control
- risk sharing
- risk retention
- risk transfer
risk avoidance - Correct Answers ✅avoid risk ex) not owning car avoids risk of car being stolen or damaged risk control - Correct Answers ✅if risk can't be avoided, it can be controlled
risk prevention: reduce likelihood loss will occur
ex) shoveling snow prevents slip and fall
risk reduction: reduce severity of loss that does occur
ex) fire extinguishers doesn't prevent fire from starting, but limits fire damage if it does occur risk sharing - Correct Answers ✅groups share financial burden of loss suffered by members of group
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