Chapter 14 Risk Management

Risk

The possibility of loss, damage, or injury.

Liability

Legal responsibility for actions and costs that injure another person.

Premium

An amount paid monthly, quarterly, or annually to an insurance company to maintain an insurance policy.

Deductible

The insured is responsible to pay a predetermined amount if and when a claim is made before the insurance company will pay any amount on the claim.

Financial Protection

A service offered by insurance companies.

Transferring Risk

The strategy of sharing risks with others by purchasing insurance.

Avoidance

The strategy of taking steps to eliminate risk to remove the possibility of property damage or researching geographic areas to stay away from areas that flood.

Assuming Risk

A strategy that states businesses are responsible for losses associated with risk.

Reducing a Risk

The strategy of minimizing risks that cannot be avoided such as shoplifting by installing a security system.

Controllable Risks

Situations (or risks) that cannot be avoided, but can be minimized by purchasing insurance or creating a risk management plan.

Uncontrollable Risks

Situations (or risks) that cannot be predicted or covered by purchasing insurance.

Financial Protection

What is a well known service offered by insurance companies?

Natural Risk

What type of risk caused by acts of nature and considered controllable?

Human Risk

What type of risk covering a negative situation caused by the actions of people to include shoplifting, embezzlement, or stolen credit cards?

Economic Risk

What type of risk caused when business activities suffer due to changes in the U.S. or the world?

Auto, Home, Life, and Health

What are the four Lines of Insurance?

Professional Liability Insurance, AKA Malpractice Insurance

What type of insurance protects service based businesses from financial losses caused by errors and negligence in how a service is provided?

Product Liability Insurance

What type of insurance protects against financial losses due to product defect that may cause injury to the user or the product?

Worker's Compensation Insurance

What is an employee benefit that covers lost wages and medical expenses for employees injured at work?

Unemployment Insurance

What is an employee benefit that provides insurance to employees who lose their job through no fault of their own?

Disability Insurance

What is an employee benefit that provides income to employees who become sick or injured due to a non-work related event or condition?