Business Risk Management & Insurance

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Questions and Answers

What is the primary purpose of risk assessment in risk management?

To eliminate all risks associated with a project.

To ensure all employees are trained on safety procedures.

To determine the probability of loss and its consequences. (correct)

To develop a detailed financial plan for future projects.

Which of the following is NOT a benefit of effective risk management?

Improved chances of prevailing in a lawsuit.

Reduction of operational costs. (correct)

Reduced chances of being sued.

Lower business and liability insurance premiums.

How can risk be minimized through contracts?

By eliminating all types of insurance.

By requiring all subcontractors to cover their own risks.

By adding provisions to reduce risk exposure. (correct)

By prohibiting any changes to project specifications.

What type of insurance specifically protects against unforeseen events like accidents?

Liability Insurance. Signup and view all the answers

Which of the following risks is likely to require a different management approach?

Low likelihood of large losses. Signup and view all the answers

What role does insurance play in risk management?

It supplements the risk management program. Signup and view all the answers

Which of the following insurance types includes coverage for theft?

Burglary and Theft Insurance. Signup and view all the answers

What is one way unmanaged risk impacts a business?

Financial losses. Signup and view all the answers

What is the call for an insurance payout?

Indemnity Signup and view all the answers

What are some basic elements outlined in an insurance policy?

Policy term, Coverage, Premiums, Deductibles Signup and view all the answers

Full-time risk managers are common among small business owners.

False Signup and view all the answers

What is one requirement that the law may impose on businesses regarding insurance?

Workers' Compensation Signup and view all the answers

What is the minimum insurance coverage required for Automobile Liability?

$3,000,000 / $3,000,000 Signup and view all the answers

Property insurance typically covers your business and personal property when damage, theft, or ______ occurs.

loss Signup and view all the answers

Which of the following is NOT typically covered by property insurance?

Personal injuries Signup and view all the answers

What is one recommended step before starting a project to assess risk?

Conduct a site survey Signup and view all the answers

What is an example of an intangible property that can be covered?

Goodwill Signup and view all the answers

Study Notes

Risk Management Benefits

Unmanaged risk can harm your business, resulting in financial loss, lower profit margins, and unnecessary liabilities.
Good risk management can lower business and liability insurance premiums and improve chances of prevailing in a lawsuit
Some risks are preventable, and others can be minimized.
Risk assessment is a key step in the risk management process where you determine the probability of loss and its consequences.

Insurance

Insurance supplements your risk management program.
It protects your business against uncontrollable events such as accidents and theft.
Without insurance, a single accident could lead to a lawsuit that could bankrupt you

Insurance Basics

Insurance transfers risk and provides exemption from loss incurred by a course of action.
Insurance payout is known as Indemnity.
The contract between your business and the insurance company is outlined in an insurance policy.
The policy lists the policy term, coverage specifics, premiums, and deductibles.

Finding the Right Insurance Company and Agent

Large companies often employ full-time risk managers; most small businesses do not.
Finding the right insurance company and agent is vital to the risk management process.
Agents can be either exclusive to one insurance company or independent, allowing them to shop around for policies with competing companies.
It's important to trust your agent as they can provide valuable insurance and risk management knowledge, helping you assess your needs.

Required Coverage

Regulations may mandate certain insurance coverage levels, like workers' compensation, unemployment, and vehicle insurance.
Construction contracts often require contractors to maintain specific types of insurance and coverage levels.

Types of Insurance

Commercial General Liability including Premises - Operations, Products/Completed Operations, Contractual Insurance, Property damage, Independent Contractors, Bodily Injury. Minimum coverage required is 3,000,000/3,000,000 / 3,000,000/3,000,000.
Automobile Liability (Owned, Non-owned, or Rented). Minimum coverage required is 3,000,000/3,000,000 / 3,000,000/3,000,000.
Workers' Compensation & Occupational Diseases is required by applicable laws.
Employer's Liability minimum coverage is $3,000,000.

Site Survey & Added Risk

Conducting a site survey is important to assess potential added risks due to special conditions on a project.
Consider the nature of each project to ensure adequate coverage for the work being performed.
Consult your insurance agent and add supplemental coverage when necessary.

Focus on Policies For Construction Industry

This chapter focuses on policies relevant to the construction industry, but individual needs should be discussed with the insurance carrier.

Property Insurance

Property insurance typically covers business and personal property against damage, theft, or loss.
Specific risks, like fire or theft, can be covered by dedicated policies or a broad-based policy covering various risks, including fire, theft, vandalism, and natural disasters such as lightning strikes.
When considering property insurance, evaluate your location and region to determine likely risks, such as hurricanes or floods.

Types of Property You May Want to Cover

Buildings and other structures (owned or leased)
Furniture, equipment, and supplies
Inventory
Machinery
Computers/Tablets
Intellectual property (books and documents)
Automobiles, trucks, and construction equipment
Intangible property (goodwill, trademarks, etc.)
Leased equipment

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Description

Explore the essential benefits of risk management and insurance for businesses. This quiz covers how managing risks effectively can protect your business from financial loss and improve your insurance premiums. Gain insights into risk assessment and the role of insurance in safeguarding against unforeseen events.