Michigan Life and Health Examination (2024/2025) (Certified Solutions)

Michigan Life and Health Examination (2024/2025) (Certified Solutions) Risk The uncertainty or chance of a loss occurring. The two types are pure and speculative. Pure Risk Refers to a situation that can only result in a loss or no change. There is no opportunity for financial gain. Speculative Risk Involves the opportunity for either loss or gain. Hazards Conditions or situations that increase the probability of an insured loss occurring. Hazards and classified as physical hazards, moral hazards, or morale hazards. Perils The causes of loss insured against in an insurance policy. Life Insurance Insures against the financial loss caused by the premature death of the insured. Health Insurance Insures against medical expenses Property Insurance Insures against the loss of physical property or the loss of its income producing abilities Casualty Insurance Insures against the loss and/or damage of property and resulting liabilities Loss the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. Avoidance eliminating exposure to a loss Risk Retention Planned assumption of risk by an insured through the use of deductibles, so- payments, or self-insurance. It is also known as self-insurance when the insured accepts the responsibility for the loss before the insurance pays. The purpose of retention is: 1) To reduce expenses and improve cash flow 2) To increase control of claim reserving and claims settlements 3) To fund for losses that cannot be insured Sharing A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss to share the losses that occur within that group. Reduction Actions to lessen the possibility or severity of a loss. Transfer The most effective way to handle risk so that the loss is borne by another party. Insurance is the most common method. Insurable Risks Involve What Losses? 1) Due to chance: a loss that is outside of one's control. 2) Definite and Measurable: a loss that is specific as to the cause, time, place and amount. 3) Statistically Predictable: Insurers need to be able