FIN 3440 Study Guide - Final Guide: Liability Insurance, Vehicle Insurance, Property Insurance
Document Summary
The possibility of an unfavorable variation from a desired result. Expected value is also useful in assessing risk because it captures the probability and severity of a loss in the calculation. The burden of risk: some risks involve possibility of gain/loss (i. e. investments, other risks involve only loss (i. e. home, life, the negative consequences of risk may be avoided, reduced, or retained. + opportunity cost of activities forgone due to risk. + expenses of strategies to finance potential losses. Sources of pure risk: property risks: involve loss of property and loss of use (lost income/added expense, business/individuals that own, rend, or use property, exposed to risk of property damage, destruction, death. Injury of customer on property, car accidents, product liability, environmental pollution, employee rights violations: personal risks: five risks that are a result of one"s inability to earn income, premature death, illness, disability, unemployment, retirement.