How can you manage risk using risk strategies?
risk assumption
accepting the consequences of risk.
risk transfer
buying insurance to shift the risk of financial loss to an insurance company.
How can you reduce the risk of an automobile accident?
choose to drive a reliable sedan instead of a sports car. Cars are rated according to safety and injury information.
risk reduction
finding ways to lower your chance of incurring a loss.
4 risk strategies
reducing risk, avoiding risk, transferring risk, and assuming risk
self-insure
setting aside money to be used in the event of injury or loss. This is one method of assuming risk.
risk avoidance
stopping behavior that leads to a risk.
premium
the price you pay for insurance coverage. The premium can be paid monthly, quarterly, semiannually, or annually. The more risk the insurer takes, the higher the premiums.
risk assessment
the process of identifying risks and deciding how serious they are.