Loss and Risk Copy

A risk is the chance of loss. Some examples of risk include:

  • Owning a house is a risk, since it could be damaged by fire or wind.
  • Driving a car is a risk, since the driver could cause an accident, suffer injuries, or injure someone else and get sued.

A loss is a negative financial consequence of an unplanned event. For example:

  • Henry’s car suffers $7,000 damage when he crashes his car into a tree, the $7,000 damage is a loss.
  • Hector is hospitalized and has a $15,000 hospital bill.

People and businesses buy insurance to transfer the risk of having a loss to an insurance company.