Learn more about moneyandinvestments with this collection
How to focus on the present moment
How to cultivate empathy and understanding towards others
How to set personal and professional goals
#1 Avoidance
Avoidance is a method for mitigating risk by not participating in activities that may incur injury, sickness, or death. Smoking cigarettes is an example of one such activity because avoiding it may lessen both health and financial risks.
Life insurance companies mitigate this risk on their end by raising premiums for smokers versus nonsmokers. Under the Affordable Health Care Act, also known as Obamacare, health insurers are able to increase premiums based on age, geography, family size, and smoking status. The law allows for up to a 50% surcharge on premiums for smokers.
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#3 Sharing
Sharing risk is often implemented through employer-based benefits that allow the company to pay a portion of insurance premiums with the employee. In essence, this shares the risk with the company and all employees participating in the insurance benefits. The understanding is that with more parti...
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#5 Loss Prevention and Reduction
This method of risk management attempts to minimize the loss, rather than completely eliminate it. While accepting the risk, it stays focused on keeping the loss contained and preventing it from spreading. An example of this in health insurance is preventative care.
Health insurers encourag...
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#4 Transferring
The use of health insurance is an example of transferring risk because the financial risks associated with health care are transferred from the individual to the insurer. Insurance companies assume the financial risk in exchange for a fee known as a premium and a documented contract between the i...
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The Key Takeaways
- Avoidance means not participating in activities that could harm you.
- Retention acknowledges the inevitability of certain risks, and in terms of health care, it could mean picking a less expensive health insurance plan.
- Sharing risk can be applied to how employer-based benefit...
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256 reads
#2 Retention
Retention is the acknowledgement and acceptance of a risk as a given. Usually, this accepted risk is a cost to help offset larger risks down the road, such as opting to select a lower premium health insurance plan that carries ...
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41 reads
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