RMI - Risk Management and Insurance [OVERVIEW]
Risk Management and Insurance
Introduction
Risk, defined as the chance of exposure to injury or loss, is a part of our daily lives. Whether it is the loss of a cell phone, damage to a vehicle from an accident, or theft of a laptop, we all encounter risks. In the business world, owners and managers actively strive to manage risk. They achieve this by assessing both the likelihood of specific risks and the potential monetary losses associated with them. When the likelihood and monetary impact are minimal, managers may choose to ignore the risk or take steps to avoid it altogether. However, as the likelihood and potential losses increase, prudent managers seek to either reduce the risk or transfer it through purchasing insurance. In this module, we will explore the complexities of risk within a business context, develop risk management strategies, and explore careers in the field of risk management and insurance.
Knowledge Questions
In this module, we will be unraveling these knowledge-based questions:
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What is risk and how is it managed?
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What kinds of insurance does a business need?
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What are some basic insurance concepts I need to understand?
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How do I analyze risk in order to make insurance decisions?
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What are some career options in the insurance industry?
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Key Terms
Claim | a formal request for payment from the insurance company after a covered event. For example, if your phone is stolen, you file a claim with your renter’s insurance.
Coverage | the protection provided by an insurance policy. For example, comprehensive auto insurance covers theft, accidents, and natural disasters.
Deductible | the amount you pay out of pocket before insurance kicks in. For example, if your health insurance has a $500 deductible, you must pay the first $500 of medical expenses before the insurance policy starts to cover costs.
Insurance | a financial arrangement where individuals or businesses pay a fee to protect themselves against specific risks.
Insured | the person or property covered by an insurance policy.
Insurer | the insurance company that provides coverage.
Liability | the legal responsibility for damages or injuries caused to others. For example, business liability insurance protects against lawsuits from customers who slip and fall in our store.
Policy | the written contract between the insurer and the insured. The policy outlines the coverage details. For example, a homeowner’s policy specifies what is covered in case of property damage at your home.
Policyholder | the person or entity that owns an insurance policy. For example, you are the policyholder when you purchase health insurance for yourself.
Premium | the amount of money paid regularly (usually monthly or annually) to maintain an insurance policy.
Probability | the likelihood of an event happening. For example, the probability of a house fire is low, but having home insurance is still essential.
Risk | the chance of exposure to injury or loss.
Risk management | the process of identifying, assessing, and mitigating threats or uncertainties that can impact an organization or an individual.
Risk | the chance of loss or harm occurring.
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