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
Day on which the New York Stock Exchange is open for transactions; used in calculating accumulation unit values for variable dollar insurance products. ...
Sale of life insurance policies through vending machines. This method of distribution is generally limited to travel accident insurance, supplemental health or disability policies, or life ...
Right of a policyholder, in life insurance with cash values, to continue full coverage for a limited period, as shown in a table in the policy, with no further premiums payable. ...
Provision in a policy that states the circumstances under which an insurer may elect not to renew the policy. ...
Organization located in Washington, D.C., whose membership consists of automobile insurers. ...
Situation in which parties agree to take part in a structured settlement negotiation through the guidance of a neutral expert. By participating in this process, the parties do not agree ...
Publication stipulating underwriting rules applicable for a given line of insurance, classifications of exposures within that line of insurance, and premium rates per classification. For ...
Irrevocable trust into which the grantor places assets and receives in turn a fixed amount of income from a fixed annuity (amount of income stipulated at the time the trust is established) ...
Act by a company that authorizes an agent to act on its behalf. ...
Have a question or comment?
We're here to help.