Insurance Perils and Loss
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Questions and Answers

What is a peril in the context of insurance?

  • An immediate, specific event that causes a loss (correct)
  • A condition that makes a loss more likely
  • An event that increases the likelihood of a loss
  • A factor that can be measured or observed

    • Which type of insurance policy explicitly lists the perils it covers?

  • Special (Open) Perils
  • Comprehensive Perils
  • Specified (Named) Perils (correct)
  • General Perils

    • What feature distinguishes Special (Open) Peril policies from Named Peril policies?

  • They cover all perils not explicitly excluded (correct)
  • They exclude all perils unless specified
  • They list all perils they cover
  • They only cover natural disasters

    • What type of hazard stems from the dishonest character of the insured?

    <p>Moral hazard</p> Signup and view all the answers

    Which of the following is an example of a physical hazard?

    <p>Leaving a gasoline can near a furnace</p> Signup and view all the answers

    What is a hazard in the context of insurance?

    <p>A situation increasing the likelihood of a peril</p> Signup and view all the answers

    How does a special (open) peril policy handle perils?

    <p>Excludes specific perils listed in the policy</p> Signup and view all the answers

    What is considered a moral hazard?

    <p>Submitting a fraudulent insurance claim</p> Signup and view all the answers

    Which peril is an example of a natural disaster?

    <p>Hail</p> Signup and view all the answers

    What defines a physical hazard?

    <p>A physical condition making a loss more likely</p> Signup and view all the answers

    Study Notes

    Peril (Causes of Loss)

    • A peril is an immediate, specific event that causes a loss, such as fire, lightning, windstorm, hail, earthquake, and flooding.
    • Perils can also be referred to as the accident itself.

    Named Perils Versus Special (Open) Perils

    • Insurance policies define perils protected against in one of two ways: Specified (Named) Perils and Special (Open) Perils.
    • Named Perils policies individually list perils that they cover, and if a loss is caused by a peril that is not listed, it is not covered.
    • Special (Open) Perils policies do not name the perils they cover but instead begin by saying they cover all direct causes of loss.

    Hazards

    • A hazard creates an increased possibility that a peril will actually occur.
    • Examples of hazards include icy roads, driving while intoxicated, and improperly stored toxic waste.

    Types of Hazards

    • Physical hazards are physical or tangible conditions that make a loss more likely to occur, such as poor health, ice, and fire.
    • Moral hazards make the loss more likely to occur due to the dishonest character of the insured, who may be more disposed to either engage in criminal activity or cause a loss.
    • Moral hazards occur when the insured is more intentioned and conscious of participating in wrongdoing that is more likely to lead to a loss.

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    Description

    Understand the concept of perils, types of perils, and how they are defined in insurance policies. Learn about named perils and special open perils.

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