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

4. 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.

5. Key Concepts
Handling Risk
Insurance Protection

6. 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

7. 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

8. 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

9. 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.

10. 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.

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

12. 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.

13. 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.

14. 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.

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

16. 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

17. 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.

18. 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

19. 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

20. 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

21. 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

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

23. 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.

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

25. 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.

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

27. End of