Insurance and Risk Management

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Insurance and Risk Management
Appendix B
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The Concept of Risk

• Risk is uncertainty about loss or injury.
• A typical business faces a variety of risk
• Fire
• Burglary
• Water Damage
• Storm Damage
• Accidents
• Judgments from Lawsuits
• Natural Disasters

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Risk Management
Insurance contract by which the insurer for a
fee agrees to reimburse the insured a sum of
money if a loss occurs. Premium amount paid by
the insured to the insurer to exchange for
insurance coverage.

• Avoiding Risk
• Reducing Risk
• Self-Insuring Against Risk
• Shifting to an Insurance Company

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Basic Insurance Concepts

• Insurable Interest an applicant must
  demonstrate a direct financial loss will result
  if some event occurs.
• Insurable Risk the requirements that a risk
  must meet in order for the insurer to provide
  protection.
• Rule of Indemnity the insured cannot collect
  more than the amount of the loss.
• The Law of Large Numbers statistical
  probabilities that seemingly random events will
  follow predictable patterns.

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Sources of Insurance Coverage

• Public Insurance Agencies
• Unemployment Insurance
• Workers Compensation
• Social Security
• Private Insurance Companies
• Prudential
• State Farm
• Geico

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Types of Insurance

• Property and Liability Insurance
• Homeowners Insurance
• Auto Insurance
• Commercial and Business Insurance
• Liability Insurance
• Health and Disability Insurance
• Managed Care Plans
• HMO and PPO
• Disability Income Insurance
• Life Insurance
• Term Policies
• Whole Life and Universal Life