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Question: There are several techniques available for managing risk. For each of the following risks, identify an appropriate technique, or combinations of techniques, that would be appropriate for dealing with risk.

  1. A family head may die prematurely because of heart attack.
  2. An individual’s home may be destroyed in hurricane.
  3. A new car may be severely damaged in an auto accident.
  4. A negligent motorist may be ordered to pay a substantial liability judgment to someone who is injured in an auto accident.
  5. A surgeon may be sued for medical practice.

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1) A family head may die prematurely because of a heart attack.

Techniques for managing risk:

  • A family head should live in a healthy lifestyle such as exercise regularly, eat healthy food and do medical check up frequently to reduce the chance of dying prematurely from a heart attack.
  • Life insurance can also be used, which reduces or eliminates the financial consequences to surviving family members if a family head dies prematurely.

The family member still can survive even if a family head die prematurely.


2. An individual’s home may be destroyed in hurricane.

Techniques for managing risk:

  • Property insurance which is dealing with the risk of hurricane.
  • Retention by owner can also be used by purchasing the policy with a deductible.

3) A new car may be severely damaged in an auto accident.

Techniques for managing risk:

  • Collision insurance is an effective way to deal with exposure.
  • Loss prevention by following the safety rule on the road & drive defensively.
  • Retention by purchasing the policy with a deductible for collision losses.

4) A negligent motorist may be ordered to pay a substantial liability judgement to someone is injured in auto accident.

Techniques for managing risk:

  • Private passenger auto insurance protects the insured against liability arising out of auto accidents that cause property damage or bodily injured to others.
  • Medical expenses coverage and uninsured motorist coverage are also available.

5) A surgeon may be sued for medical malpractice.

Techniques for managing risk:

  • Professional liability insurance should be purchased by a surgeon that protect against malpractice lawsuits or lawsuits that results from substantial error or omission.
Information, inspiration taken from: academia.edu

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