> > > > Insurance and Risk Management Appendix B

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

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.

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.

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

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