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Chapter 1 - Charts A,B,C
General Insurance Principals


    A: What is Insurance?

  • Method of handling PURE RISK;
  • Spread over a large number of like exposure units;
  • Predict individual losses with some accuracy.
A traditional definition would say that insurance is a device that provides for the transfer of individual risk to a company which, for consideration, assumes losses suffered by the insured to a predetermined limit.


    B: What is the purpose of Insurance?

  • Indemnify against economic loss
     
  • Indemnify = To compensate or reimburse for loss

    C: Insurance Is About Risk

  • Speculative Risk: provides the possibility of both gain or loss!
     
  • Pure Risk: involves only the possibility of loss…gain is not possible!
Remember, pure risks are insurable, speculative risks are not!!

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