FCS 340: Money Management

Risk Activity

Outcome: Understand risk as an important part in determining the right level of insurance you
should have.

Directions: Identify examples of assuming, reducing, transferring, and avoiding risk using
different movies, TV shows, or You Tube Videos (see examples below). Then, compare each
example to your own life to determine if you have the right level of insurance based on your
understanding of risk. Prepare your responses in a word document and upload it into the I-Learn
assignment by the due date.

Risk 1: Assume risk: Low Severity Low and Low Frequency occurrences
Movie Example: If the curtains were not insured in The Sound of Music, the
Captain could not get the money to replace them after Maria sewed them into play
clothes. However, he was not too stressed about them because they weren’t worth
much and he was about to get new ones.
Compared to my life: We chose not to get a 5-year guarantee on my sister’s
phone, because it would cost more that we would be willing to spend to replace it.

Risk 2: Reduce risk: Low Severity and High Frequency occurrences

Movie Example: In the Wizard of Oz, Dorothy was not properly protected from
the hurricane, so she will not receive compensation for her injuries. She did not go into
the storm cellar when the twister came.
Compared to my life: Whenever I use a table saw, I wear safety goggles to
protect my vision from flying pieces of wood.

Risk 3: Transfer risk: High-Severity and Low Frequency occurrences

Movie Example: In Soul Surfer, the girl gets attacked by a shark and has many
medical bills. Her insurance would cover most of them if she had health insurance. This
was an unpredictable event, so it was safe of them to get insured.
Compared to my life: Our house is very important to us, so we have
homeowner’s insurance to help us keep it nice.

Risk 4: Avoid risk: High Severity and High Frequency occurrences

Movie Example: In Sense and Sensibility, one sister is prone to walking in the
rain and taking risks very severe to her time period. She put herself at risk a lot and
came done with a life-threatening fever. She could have avoided this by staying inside
during bad weather. Her insurance rates will go up if she constantly puts herself at risk.
Compared to my life: I always say no when asked to cliff jump or ride a
motorcycle without a helmet. I have also never received a speeding ticket, so my auto
rate is lower.

In paragraph form (3 sentences minimum), summarize what you have learned about risk from
this activity.
 I learned that there are many times when insurance can be useful. In those times
that are unpreventable and unpredictable, insurance can be used to give you security.
Sometimes, though, the problem might not be worth the cost or stress of insurance.
Many problems can be avoided simply by being smart. You can live safely and cover
those things you can’t change.