Risk identification, risk transfer, and reinsurance concepts used across the insurance industry.
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- What is risk identification?
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The process of discovering and documenting potential threats or exposures that could cause loss or harm to an organization or individual.- What does risk transfer mean in insurance?
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Shifting financial responsibility for a potential loss from one party to another, typically to an insurer through a policy contract.- Define pure risk.
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A risk that involves only the possibility of loss, with no potential for gain.- Define speculative risk.
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A risk that involves the possibility of either loss or gain.- What is reinsurance?
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Insurance purchased by an insurance company to transfer or share part of its risk and premium with another insurance company.- What is risk avoidance?
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Eliminating or not undertaking an activity to avoid exposure to a particular risk.- What is risk mitigation?
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Taking action to reduce the likelihood or severity of a potential loss.- What is risk retention?
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Accepting and bearing the financial impact of a loss without transferring it to another party.- What does deductible mean?
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The dollar amount that a policyholder must pay out of pocket before the insurer begins to pay benefits under a policy.- What is coinsurance?
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A cost-sharing arrangement where the policyholder pays a fixed percentage of covered losses after the deductible, while the insurer pays the rest.- Define liability insurance.
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Coverage that protects the policyholder from financial loss due to legal liability for bodily injury or property damage caused to others.- What is property insurance?
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Coverage that protects the policyholder's own buildings, contents, and other property against loss from covered perils like fire, theft, or vandalism.- Define premium.
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The periodic payment (usually annual or monthly) that a policyholder makes to an insurer to maintain insurance coverage.- What is underwriting?
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The process by which an insurer evaluates and assesses risks to determine whether to accept or reject an insurance application and at what premium.- What is claims management?
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The process of handling insurance claims from initial notice through investigation, approval, and payment of benefits.
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