Requirements Of Insurable Risk
Definition of "Requirements of insurable risk"
- a large number of homogeneous exposures (in order for the deviation of actual losses from expected losses to approach zero, and thecreditability of the prediction to approach one).
- loss must be definite in time and amount.
- loss must be fortuitous. An insured cannot cause the loss to happen; it must be due to chance.
- must not be an exposure to catastrophic loss; risks must be spread over a large geographical area to prevent their concentration, REINSURANCE often is used to spread potentially catastrophic risks.
- premium must be reasonable in relation to the potential loss. In theory, one could even insure against a pencil point breaking, butthe premium would be much greater than any possible loss.
Popular Insurance Terms
Quantitative measurement of the total costs (losses, risk control costs, risk financing costs, and administration costs) associated with the risk management function, as compared to a ...
Net cost of insurance with no markup to cover an intermediary's profit or expenses. An intermediary, such as a broker, sells an insurance product net; that is, there is no loading for his ...
Arrangement in health insurance to discourage multiple payment for the same claim under two or more policies. When two or more group health insurance plans cover the insured and dependents, ...
Salaries plus commissions plus overhead expenses plus office rent plus fees charged for memberships in industry associations and bureaus plus guaranty association assessments plus taxes ...
Under Section 1035 of the Internal Revenue Code, stipulation that the exchange of one life insurance policy for another life insurance policy will generally not result in a recognized gain ...
Automobile purchased or leased by the insured or the insured's spouse that is in addition to the insured or the insured spouse's present car as covered under the personal automobile policy ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Technique of estate planning under which an estate is divided into two parts and taxed at a lower rate rather than remaining as a whole and taxed at a higher rate. This division may be ...
Model state law of the NAIC that requires the insurance agent who is replacing the policy to: give the policyholder a replacement notice; forward a signed copy of the replacement notice to ...
Have a question or comment?
We're here to help.