Personal insurance

Insurance that covers the financial con

of losses to individuals and families ca
death, illness, injury, disability, and une

Loss exposure

Any condition or situation that presents

possibiliity of a financial loss, whether
occurs.

Cause of loss

Means by which property is damaged o

(e.g., fire and theft); also called perils.

Property loss exposure

Any condition or situation that presents

possibility of a property loss.

Real property

Land, as well as buildings and other st

attached to the land or embedded in it.

Personal property

Tangible or intangible property that is n

property.

Liability loss exposure

Any condition or situation that presents

possibility of a liability loss.

Liability loss

A claim for moeny damages because o

another party or damage to another pa
property.

Civil law

Body of law that deals with the rights a

citizens regarding one another.

Tort

A wrongful act, other than a crime or b

contract, committed by one party again

Intentional tort

A deliberate act that causes harm to

another person.

Absolute liability (strict liability)

Legal liability that arises from

inherently dangerous activities or
dangerously defective products that
harm another, regardless of the
degree of care used; does not require
proof of negligence.

4 elements of negligence

1. A duty to act
2. A breach of that duty
3. An injury or damage occurs
4. The breach of duty is the direct
cause of the injury or damage

1st element of negligence

A duty to act. (i.e., homeowners have

a duty to maintain their premises so
as not to cause injury to a guest.)

2nd element of negligence

A breach of that duty (i.e., if a parent

allows a kid to leave an object, such
as a ball, on the front entry steps,
they may have breached their duty to
keep the premises safe)

3rd element of negligence

An injury or damage occurs (i.e., a

guest trips on the ball left on the
steps and breaks his leg)

4th element of negligence

The breach of duty is the direct cause

of the injury or damage (in an
unbroken chain of events). The direct
cause of the guest's broken leg is the
ball the kid left on the steps.

Name 6 intentional torts

Libel, slander, assault, battery,

trespass, nuisance

Libel

A written or printed untrue statement

that damages a person's reputation.

For example, Ted prints an article in a

local community newsletter claiming
that his neighbor, Paul, has been
convicted of drunken driving, which is
not true. Libel is an intentional tort.

Slander

An oral untrue statement that

damages a person's reputation. If, at
a parent-teacher meeting, Susan
publicly and wrongly accuses a local
pharmacist of selling illegal drugs to
teenagers, she may be guilty of
slander. Slander is an intentional tort.

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Contractual liability

Liability assumed under any contract

or agreement.

Statutory liability

Liability imposed by a specific statute

or law.

Risk management

The process of making and carrying

out decisions that will decrease the
adverse effects of potential losses.

Personal risk management

The risk management process applied

to the loss exposures of individuals or
families.

Errors and omissions (E&O)

Negligent acts (errors) committed by a

person while conducting insurance
business that give rise to legal liability
for damages; can also involve a failure
to act (omission) that creates legal
liability.

Assault

The intentional and unlawful threat of

bodily harm. If Mary threatens to hit

Betty, and Betty believes that Mary is

ready and willing to carry out her
threat, Mary has committed an assault
on Betty.

Battery

Unlawful physical contact with another

person. If Mary carries out her threat
and hits Betty, she has committed a
battery. Betty may sue Mary for
damages because of assault and
battery.

Trespass

the unauthorized possession or use of

land. If Jacob parks his car in Chris's
yard without Chris's permission, Jacob
may be guilty of trespass.

Nuisance

the violation of a person's right to

enjoy use of property without
disruption from outside sources. For
instance, if Juliette persistently gives
noisy parties that last late into the
night, her neighbors may seek an
injunction against such activities under
civil law.

Loss control

Risk management technique to reduce

the frequency or severity of losses.

Avoidance

Risk management technique by which an individual or

a family avoids a loss exposure by choosing not to
own a particular item of property or not to engage in a
particular activity.
Noninsurance transfer

A risk management
technique that transfers
loss exposures from one
party to another party that

is not an insurer.

Retention

A risk management
technique that draws on
the financial resources of
an individual or a family to
apy for party or all of the
consequences of a
particular loss exposure.
If individuals or families
do not transfer their loss
exposures to an
insurance company or to
anyone else, they retain
their losses (either
intentionally or
unintentionally) an dmust
pay for such losses
themselves.

Package policy

Policy that includes two or

more lines of insurance.
In personal insurance,
such as property and
liability, examples of
package policies are the
homeowners policy and
the personal auto policy.

Name five problesm

associated with
automobile insurance.

1) High frequency of auto

accidents
2) High costs of auto
accidents
3) Underwriting losses
4) Irresponsible drivers
5) Availability and
affordability of auto
insurance

Underwriting loss

An insurer's loss incurred

when losses and
expenses for a given
period are greater than its
premium income for the
same period.

Standard market

Insurers who voluntarily

offer insurance coverages
at rates designed for
customers with average
or beter-than-average
loss exposures.

Tort

a wrongful act, other than

a crime or breach of
contract, committed by
one party against another

Negligence

Acting differently from the

way a reasonably prudent
person would act under
similar circumstances. An
individual is negligent
when he or she fails to
exercise the appropriate
degree of care under
given circumstances.

Name the seven

approaches to
compensating auto
accident victims:

1) the tort liability system

2) financial responsibility
laws
3) compulsory insurance
laws
4) unsatisfied judgment
funds
5) uninsured motorists
coverage

6) underinsured motorists
coverage
7) low-cost auto
insurance