Life & Health · Chapter 2 · Handling Risk
Methods of Handling Risk (STARR)
Definition
Sharing (spread among parties — reciprocals, coinsurance), Transfer (shift by contract — buying insurance), Avoidance (eliminate the activity — the MOST COMPLETE method), Reduction (lessen frequency/severity — smoke alarms), Retention (keep some risk — deductibles, self-insurance). Plus loss prevention (actions to eliminate loss).
Exam tip
Buying insurance = TRANSFER. A deductible = RETENTION. 80/20 coinsurance = SHARING. Not building in a flood zone = AVOIDANCE.
Easy to confuse with
These are what this term gets tested against — if you can't tell them apart cold, drill the contrast.
Related terms