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- 1RISK MANAGEMENTRisk Management is the term given to the various methods of handling risk (uncertainty of loss), including but not
exclusively related to, the purchase of insurance. Once a risk of loss is identified, various methods of dealing with
that risk may be utilized. - 2AVOIDANCEAvoidance is simply avoiding as many risks as possible. For example, someone could avoid a car crash by never
driving or owning an automobile. This type of risk management is often impractical. - 3MITIGATION/REDUCTIONMitigation, or Reduction of risk, decreases the probability of loss by taking steps to reduce the loss. The use of fire
extinguishers, sprinkler systems, seat belts and safety programs are good examples of reduction of loss methods. - 4RETENTIONRetention, or Self Insuring, of risk occurs when the client assumes the whole risk of the loss without purchasing
insurance or through using deductibles. For example, by not purchasing dental insurance, an individual is selfinsuring the cost of dental services. - 5TRANSFER OF RISKransfer of Risk is an option that includes the use of insurance. An insured may purchase insurance and transfer
the risk of loss to an insurer. Although we can never transfer the emotional pain of death, by purchasing
insurance, we can transfer the financial obligations of the insured to the insurance company.
Two examples of non-insurance transfer of risk are using “Hold Harmless Agreements” and “Incorporation.” By
incorporating, individuals limit liability to the amount invested in the corporation, thereby eliminating personal
risk.
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- RISK MANAGEMENT Flashcards on Untitled_6, created by queeny15z on 18/07/2013.
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- queeny15z
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