6-1 Risk Assessment and Strategies

Risk Transfer

Also called risk shifting, occurs when you buy insurance to shift the risk of financial loss to an insurance company.

Risk Assumption

Is a strategy in which you accept the consequences of risk.

Risk

Is the chance of injury, damage, or economic loss.

Risk Assessment

Is the process of identifying your risks and deciding how serious they are.

Loss

Refers to some type of physical injury, damage to property, or disappearance of property assets.

Probability

The likelihood of a risk actually resulting in a loss.

Premium

The price you pay for insurance coverage

Self-Insure

Which involves setting aside money to be used in the event of injury or loss of assets

Risk Avoidance

You stop the behavior or avoid the situation that leads to the risk

Risk Reduction

involves finding ways to lower your chance in incurring a loss.