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Insurance and Risk Management

Insurance and Risk Management

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Insurance and Risk Management

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  1. Appendix B Insurance and Risk Management

  2. 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

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

  4. 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.

  5. Sources of Insurance Coverage • Public Insurance Agencies • Unemployment Insurance • Worker’s Compensation • Social Security • Private Insurance Companies • Prudential • State Farm • Geico

  6. Types of Insurance • Property and Liability Insurance • Homeowner’s 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