Texas Property and Casualty Insurance Latest 2023 Already Passed

Texas Property and Casualty Insurance Latest 2023 Already Passed Insurance ✔✔The transfer of the possibility of a loss (risk) from an individual or business to an insurance company, which in turn spreads the costs of unexpected losses to many individuals Law of Large Numbers ✔✔The larger the number of people with a similar exposure to loss, the more predictable actual losses will be Law of Large Numbers Example ✔✔When issuing a policy on a 35 year old male, the insurance company has no way of knowing or accurately predicting when he will die. Instead, they will look at a large group of similar risks - 35 year old males of similar lifestyles/health - and make some conclusions based on statistics of past losses to create a general idea of the predicted time of death and set premiums accordingly Insurable Interest ✔✔When the insured would incur a financial or other type of benefit loss if the insured object was damaged/lost 3 Elements of Insurable Risk ✔✔1. Financial (monetary interest) 2. Blood (relative) 3. Business (a business partner) Risk ✔✔The uncertainty or chance of a loss occurring Two Types of Risk ✔✔1. Pure risk 2. Speculative risk Pure Risk ✔✔Situations that can only result in a loss or no change, there is no opportunity for financial gain Speculative Risk ✔✔Situations that have the opportunity for either loss or gain Which type of risk are insurance companies willing to accept? ✔✔Pure risk situations Peril ✔✔The causes of loss insured against in an insurance policy Perils of Life Insurance ✔✔The financial loss caused by the premature death of the insured Perils of Health Insurance ✔✔The medical expenses and/or loss of income caused by the insured's sickness or accidental injury Perils of Property Insurance ✔✔The loss of physical property or the loss of its income-producing abilities Perils of Casualty Insurance ✔✔The loss and/or damage of property and resulting liabilities Hazard ✔✔Conditions or situations that increase the probability of an insured loss occurring 3 Classifications of Hazards ✔✔1. Physical hazards 2. Moral hazards 3. Morale hazards Physical Hazards ✔✔Hazards arising from the material, structural, or operational features of the risk, apart from the persons owning or managing it Moral Hazards ✔✔Applicants that may lie on an application for insurance, or in the past have submitted fraudulent claims against an insurer Morale Hazards ✔✔Increase in the hazard presented by a risk, arising from the insured's indifference to loss because of the existence of insurance Conditions ✔✔The section of an insurance policy that indicates the general rules that the insurer and insured agree to follow under the terms of the policy