ND Property Insurance Latest Update Graded A+

ND Property Insurance Latest Update Graded A+ Insurance the transfer of financial responsibility associated with a potential of a loss (risk) to an insurance company, which in turn spreads the cost of unexpected losses to many individuals. Law of Large Numbers Principal stating that the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss. This law forms the basis for statistical prediction of loss upon which rates for insurance are calculated. Insurable Interest the insured must have an insurable interest in the person or property covered by an insurance policy. This means the insured would incur a financial loss if the insured property was damaged Risk the uncertainty or chance of a loss occurring Pure Risk Refers to situations that can only result in a loss or no change, no opportunity for financial gain Speculative Risk involves the opportunity for either loss or gain. Hazard condition or situation which creates or increases the probability of or extend of a probable loss from a peril Moral Hazard dishonest predisposition on the part of an insured which increases the change of loss Morale Hazard applicants who demonstrate a careless attitude that could increase the change of loss that would be greater than would otherwise be the case Physical Hazard condition of the subject of insurance which creates or increases the change of loss, such as: structural defects, occupancy, poor housekeeping, or location Peril a specific cause of loss, insured against in standard property policies include fire, wind, hail, explosions, etc Direct Loss direct, physical damage to buildings and/or personal property EX: building that catches fire Indirect Loss or consequential losses are considered losses as a result of direct loss. Usually result from the time it takes to repair or replace damaged property. Most Common Indirect Losses homeowners facing extra living expenses while the home is being repaired commercial loss of profits while a business is closed for repairs Actual Cash Value (ACV) method of valuation reinforces the principle of indemnity because it recognizes the reduction of value of property as it ages and becomes subject to wear and tear and obsolescence. = current replacement cost- depreciation Replacement COst the cost to replace damaged property with like kind and quality at today's price, without any deduction for depreciation