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Cards In This Set
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Define RISK
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The possibility of loss
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DEFINE Direct Loss
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First or immediate loss that arises from an event
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DEFINE Indirect (consequential) loss
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Loss that occurs only as a secondary result following the occurance of a peril, e.g. hotel expense after a fire
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DEFINE Peril
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Refers to the cause of the loss e.g. illness, death, theft, fire, flood, etc.
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DEFINE Hazard
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An act or conditon that increases the likelihood of the occurrence of a peril and/or the severity of a loss if a peril does occur.
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DEFINE Law of Large Numbers
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The more observations we have about past realizations of a potential loss, the better our estimate of average losses in the future
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Financial risk involves...?
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Financial loss
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Example of Non-finanical Risk?
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Emotional distress cost
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Particular risks affect...?
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Individuals or small groups
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Fundamental risks affect...?
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Large segments of society at the same time
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DEFINE personal risks
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Concerned with death, injury, illness, old age, and unemployment
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Property risks
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Direct and indirect losses that arise from the destruction or loss of property, such as from fire, lightening, windstorm, flood, theft, collision, etc.
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Risk adverse
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Not willing to take a gamble at fair odds without compensation
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Risk neutral
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Indifferent to take a gamble at fair odds without compensation
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Risk seeking
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Willing to pay to take a gamble at fair odds without compensation
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