Risk, Peril and Hazard



       “Understanding insurance is about understanding the concept of risk i.e. uncertainty of economic loss”
„What is Risk? 
„Chance or probability of loss
„Forward looking (future oriented)
„Can’t know for sure until realized
„Nature of Risk
„Pure Risk: outcomes could be Loss/ No Loss.
„Speculative Risk: outcomes could be Loss/No Loss/Gain. E.g. Stock market investment
„Insurable Risks (Only Pure Risks and Not Speculative)
„Personal Risk: Illness, bodily injury, disability, death etc.
„Property Risk: Encompasses own or possessed assets
„Direct – Risk of loss caused by a fire in a owned home
„Indirect – Risk of loss of rental income from fire in a rented property
„Liability Risk: Results from law of liability , state statute or case law
„Peril is the cause of a possible loss, such as fire, windstorm, robbery, disease, or death.
„Hazard increases the likelihood of a loss, such as driving drunk, or defective house wiring

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