1. Insurance and Risk Management
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
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

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