NJ Property-Insurance Terms & Related Concepts.pdf file:///C:/Users/HP/Desktop/New%20folder%20(4)/NJ%20Property-I
NJ Property-Insurance Terms & Related
Concepts
1. Insurance: The TRANSFER of financial responsibility associated with a potentialof
a loss (risk) to an insurance company, which in turn spreads the costs of unexpected
losses to many individuals.
2. Insurance: Contract in which one party agrees to indemnify the other party
against loss, damage, or liability arising from an unknown event.
3. Indemnify: Compensate (someone) for harm or loss: "insurance carried to in-
demnify the owner for loss".
4. Insurable Interest: The insured must have an insurable interest in the person or
property covered by an insurance policy. In property insurance, the insured would
incur a financial loss if the insured property was damaged. Maybe created by the
ownership, custody, or control of a property. Must be demonstrated when policy is
issued and always exists at the time of loss.
5. Insurable Interest Example: Mortgages and leaseholders may have an insur-
able interest in the property.
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,NJ Property-Insurance Terms & Related Concepts.pdf file:///C:/Users/HP/Desktop/New%20folder%20(4)/NJ%20Property-I
6. 3 Elements of Insurable Risk: 1. Financial-a monetary interest
2. Blood-a relative
3. Business-busines partner
7. Risk: The uncertainty or chance of a loss occurring.
8. 2 Types of Risk: 1. Pure
2. Speculative
9. Pure Risk: Refers to situations that can only result in a loss or no change. No
opportunity for financial gain. Only type of which is insurable.
10. Speculative Risk: Involves the opportunity for either loss or gain. Not insurable.
Ex. gambling or investing.
11. Hazards: Conditions or situations that increase the probability or chance of an
insured loss occurring. Ex. slippery floors, congested traffic.
12. 3 Classifications of Hazards: 1. Physical
2. Moral
3. Morale
13. Physical Hazards: Those arising from the material, structural, or operational
features of the risk, apart from the persons owning or managing it. Ex. Faulty wiring
14. Moral Hazards: Refers to those applicants that may lie on an application for
insurance, or in past have submitted fraudulent claims against insurer.
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