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MODULE 5 BOOK -- MANAGING RISK

Terms in this set (30)

Avoid Risk
seeking ways of not taking the risk, if possible. Ex. A person who wants to avoid the risk of borrowing would not take the loan at all.
Assume Risk
Taking the risk and accepting ownership of any and all outcomes that may come from it. Ex. A person who wants to assume the risk of borrowing would take the loan and be prepared to deal with any fallout of not paying it back.
Reduce Risk
Seeking ways of taking the risk, while lessening the likelihood or severity of a negative outcome. Ex. A person who wants to reduce the risk of borrowing would seek the best possible terms of a loan, to make it less likely there will be trouble paying it or to make the consequences less severe if he or she can't repay it.
Transfer Risk
Give ownership ownership of the financial risk that comes from an everyday risk to someone else. Ex. When a person purchases an insurance policy.
Insurance
Protection against possible financial loss by transferring the risk to someone else.
Insurance Providers
Places that provide insurance
Risk
The chance of loss from an event that cannot be entirely controlled
Deductible
A set amount of money that must be paid by a person with insurance to cover part of the expense of a loss. They must be paid before insurers will begin to pay.
Loss
Injury, property damage, or loss of income.
Premium
The amount of money that a consumer pays to a provider for insurance. It is a predetermined fee that is paid on a regular schedule.
Risk Pool
Insurance providers organize risk pools to distribute, or spread, the risk of some kinds of financial losses. These financial losses are related to risks faced by all members of the pool.
Liability Insurance
Protects against financial losses if the insured person is responsible for injuring someone else or damaging someone else's property.
Mandated Insurance
Insurance that people are required to have by the government or lender (car loan, mortgage, etc.)
Health Insurance
Insurance that covers medical illness or injury.
Homeowners Insurance
Protects against most types of property losses and liabilities related to home ownership.
Renters Insurance
Covers your personal property in a rented apartment or home.
Life Insurance
Insurance paid to named beneficiaries when the insured person dies.
Insurance Policy
Legal contract between a consumer and an insurance provider. The policy describes the details of the insurance agreement.
Claim
A request to have an insurance provider make a payout for a loss.
Coverage
What is insured, for how much, and when the provider will make a payout.
Exclusion
Something that is not covered by an insurance policy.
Limits
The max amount of money that a provider will pay.
Policyholder
A person who has insurance.
Insurance Agent
Professionals who sell insurance to customers and work for insurance providers either directly or as outside salespeople.
Salary
Predetermined amount of money paid to an insurance agent for performing the duties of his or her job.
Commission
An amount paid to an insurance agent based on a percentage of sales.
Dependents
People such as children or spouses who rely on someone else for financial support.
Disability Insurance
A type of insurance paid to an individual if he/she is injured and is unable to work for a specified length of time.
Dental Insurance
Insurance that covers part or all of the fees imposed for dental services, including annual checkups, orthodontics, and oral surgery.
Travel Insurance
Insurance that covers injury or damage related to a vacation. This could include coverage because of bad weather, cancelled flights, illness that would cause the person not to travel, and etc.
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