Virginia Life, Annuity, and Health Part One Latest Version Already Passed

Virginia Life, Annuity, and Health Part One Latest Version Already Passed Loss decline in value of a person or thing Risk uncertainty regarding the occurrence of a loss Pure risk possibility of loss or no loss (INSURABLE) Speculative risk possibility of loss, but also chance for profit (NOT INSURABLE) Peril anything that gives rise to a loss - direct cause of financial loss (when a house burns, fire is the peril) Hazard increases the likelihood or severity of a peril Methods of risk managment Risk avoidance (eliminating hazards) Risk reduction (reducing likelihood or severity of peril) Risk retention (paying for losses out of pocket - self insure) Risk sharing or transfer (insurance) Risk sharing/transfer policy owner accepts a small loss by paying a premium, and transfers large, uncertain loss to insurance company How do actuaries calculate accurate premium rates? Risk pooling (grouping together individuals of similar risk to form a large group of risk exposures) and law of large numbers (more trials = enhanced predictability) Underwriter decides if risk is acceptable to insurer Adverse selection people who expect to receive benefits are more likely to buy insurance Indemnity to restore, in whole or part, to the condition enjoyed before the loss Valued contracts pay fixed amount indemnities Subrogation insurer stands in your shoes to collect after you receive your claim Reinsurance insurance for insurers - allows insurance company to share risks with other insurers 5 types of insurers Stock insurance: owned by stockholders; for profit Mutual insurance: nonprofit, owned by