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Read to Learn Describe four ways that individuals and businesses can handle risk. List types of insurance protection.

The Main Idea Risk of loss can be avoided, reduced, retained, or transferred. Insurance is a way to transfer the risk of loss to an insurance company, which agrees to cover you economically if certain types of risk result in loss.

Key Concepts Handling Risk Insurance Protection

Key Terms the price an insured person or business pays for insurance protection for a specified period of time premium anything that may possibly cause a loss peril

Key Terms anything that increases the likelihood of loss through peril hazard a contract between a person and insurance company to cover a specific risk insurance policy

There are four ways to handle risk. Handling Risk There are four ways to handle risk. 1 Avoid Risk 2 Reduce Risk 3 Retain Risk 4 Transfer Risk

Risk Avoidance Avoiding risk involves thinking about the consequences of decisions. All business decisions should be made with consideration of the potential for benefit and for risk.

Risk Reduction The smoke alarms and fire extinguishers in your home are examples of risk reduction. Electronic tags on store merchandise are examples of risk reduction in business.

Risk Reduction Businesses can reduce the risk of employee carelessness and incompetence in several ways. Employee Screening Employee Orientation Employee Training Drug Testing

Workplace Safety The financial impact of work accidents is staggering. To manage this risk, businesses design work areas to avoid accidents. They also provide training. Businesses must comply with state and federal health and safety regulation.

Risk Retention Risk retention is bearing financial responsibility for the consequences of loss. A business may retain the risk that customer tastes will change and merchandise will not sell.

Risk Transfer Insurance provides a way to transfer a risk of loss to an insurance company. Insurance divides a possible loss among large numbers of people or companies.

Insurance Protection You can make effective insurance choices by looking at your individual situation and then choosing the protection that fits your needs.

Insurance Protection Individuals and companies with insurance plans must pay a premium to the insurance company. premium the price an insured person or business pays for insurance protection for a specified period of time

Peril is the reason someone takes out insurance. Insurance Protection Peril is the reason someone takes out insurance. peril anything that may possibly cause a loss Examples of peril include fires, robbery, and accidents.

Defective wiring in a house is an example of a hazard. Insurance Protection Defective wiring in a house is an example of a hazard. hazard anything that increases the likelihood of loss through peril

Purchasing an insurance policy can protect you against potential loss. Insurance Protection Purchasing an insurance policy can protect you against potential loss. insurance policy a contract between a person and an insurance company to cover a specific risk

Graphic Organizer Insurance company protects the policyholder against financial loss in case of an accident or loss that is covered in the policy Policyholder pays the premium price for insurance coverage

Graphic Organizer Types of Consumer Insurance Life Insurance Protection for family members after someone dies Property Insurance Protection against damages or losses to your property Liability Insurance Covers damages that you may have caused accidentally to someone else or someone’s property Health Insurance Provides money to pay for medical bills in case of accident or sickness

Types of Insurance Companies carry workers’ compensation insurance to protect workers who are injured on the job.

Government Protection The federal government handles protection for some kinds of disasters or risks that private companies cannot cover. For example, lost crops or widespread destruction from floods or tornadoes can be costly. The federal government can declare a federal disaster area and provide financial aid to devastated areas.

What are four ways to handle risk? avoid, reduce, retain, or transfer risk

What is the difference between risk retention and risk transfer? Risk retention: retaining financial responsibility for the consequences of loss. Risk transfer: transferring financial responsibility or a portion of it.

Identify some types of insurance. Life insurance protects a person’s family. Property insurance covers property damage or loss.

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