easy · Certified Financial Planner Professional Conduct
The Crowe family owns a beach house with a replacement value of 800,000. They are concerned about the high frequency of minor window damage from sea salt, costing about 200 per year, and the low frequency but high severity risk of a hurricane destroying the home.
According to the Risk Management Matrix, how should they handle these two risks?
- Retain the window damage risk; transfer the hurricane risk through insurance.
- Reduce the window damage risk and retain the hurricane risk since it is unlikely.
- Transfer both risks to an insurance company to ensure full protection.
- Avoid both risks by selling the beach house immediately.
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