Insurance Concepts
Risk Management Methods Risk management refers to the methods you can use to deal with the uncertainty of loss (risk). You are exposed to various types of risks each day, whether you are consciously aware of it or not. Many risks are small in nature and do not present a serious or substantial financial impact; however, losses such as automobile accidents, serious health conditions, or loss of life can have a financially devastating effect. So, how can you manage (not prevent) risk? Here are five basic methods: (Acron ym STARR) 1. Sharing Risk Sharing risk distributes risk among a particular number of individuals. Each individual is responsible for a portion of the risk in direct relation to what that specific individual has invested. If you and I decide to jointly buy a boat together and pay $10,000 cash for it. We agree that I will pay $4,000 and you will pay $6,000. Instead of paying insurance premiums, we decide to self-insure the boat. I will be responsible for 40% of any loss tha