Copyright 2007 Thomson South-Western

Chapter 6

Personal Risk Management

Slide 2

What is risk?

• Risk is the chance of injury, damage, or economic loss– Personal risk

6-1 Risk Assessment and Strategies

Snow skiing involves risk of personal injury.

– Risk of financial loss– Risk of financial

resources

Slide 3

Risk Assessment

• Identify the risks

• Decide how serious they are

6-1 Risk Assessment and Strategies

RISK EXAMPLES

RiskProbability ofOccurrence

SeriousnessRating*

Possible Consequences

Losing my job Medium 10 Payments could be missed.

Credit rating suffers.

Car accident Unknown 10 Personal injuryLawsuit

Physical injury from snowboarding

Medium 3 Missed work timeMedical bills

*1 is a low risk; 5 is a medium risk; 10 is a high risk

Slide 4

Risk Strategies

• Reducing risks

• Avoiding risks

• Transferring risks

• Assuming risks

6-1 Risk Assessment and Strategies

Having a home security alarm system may reduce premiums on homeowner’s insurance.

Slide 5

Building Communications Skills

Reading Speed • Affects how much material you can read in a

given time • Affects how well you remember what you read • Can be improved with practice

– Preview material before reading– Read everything in order– Use a pacer to focus your eyes on the page– Read in a quiet place

6-1 Risk Assessment and Strategies

Slide 6

Health Insurance

• Is a plan for sharing the risk of medical costs from injury or illness

• Three basic types of health insurance plans are available– Fee-for-service plans– Preferred provider organization plans– Health maintenance organization plans

6-2 Income Protection

Slide 7

Focus on...

Being Uninsured in America • Millions of Americans do not have health

insurance • People who are not insured often have problems

paying medical bills • Uninsured patients often pay higher fees than

patients who have insurance• Having health insurance should be an important

goal in your financial plan

6-2 Income Protection

Slide 8

Types of Health Coverage

• Basic health care

• Major medical

• Dental care

• Vision care

• Catastrophic illness

6-2 Income Protection

Health insurance plans often include vision care.

Slide 9

Managing Costs

• Deductibles and co-pays

• Stop-loss provisions

• Health savings accounts

6-2 Income Protection

Medical emergencies can be very expensive.

Slide 10

Disability Insurance

• Provides money to replace a portion of normal earnings

• Pays when the insured is unable to work

• Covers an injury or illness that is not job-related

• May be short-term or long-term

6-2 Income Protection

Slide 11

Life Insurance

• Term insurance– Renewable term insurance– Decreasing term insurance– Level term insurance

• Permanent insurance– Whole life insurance– Limited-pay life insurance – Universal life insurance – Variable life insurance

6-2 Income Protection

Slide 12

Group Life Insurance

• Is purchased through an employer or an organization

• Has much lower premiums than individual policies

6-2 Income Protection

Life insurance can provide benefits for children when a parent dies.

Slide 13

Success Skills

Dealing With People in Difficult Situations • Focus on the person causing the problem

• Listen to what the person is saying

• Talk to others affected by the behavior

• Try to resolve the situation and keep the goodwill of others

6-2 Income Protection

Slide 14

Homeowner’s Insurance

• Protects from risk of loss in the home

• Covers the building and its contents

• Types of coverage– Fire and other hazards– Criminal activity– Personal liability– Acts of nature

6-3 Property Protection

Slide 15

Home Inventory

• Lists all the items of value in your home

• Should include receipts for expensive items when possible

• Is useful when filing an insurance claim

6-3 Property Protection

Slide 16

Sample Home Inventory

6-3 Property Protection

Slide 17

Renter’s Insurance

• Protects renters from the risk of losing personal property in their homes or cars

• Covers the cost of repairing or replacing personal property

• Is a low-cost wayto manage risk

6-3 Property Protection

Renter’s insurance protects you from losses as a result of fire.

Slide 18

Automobile Insurance

• Protects the owner of a car from losses as a result of accidents

• Types of coverage– Liability– Collision– Comprehensive– Personal injury– Uninsured/underinsured motorist– Towing/rental car

6-3 Property Protection

Slide 19

Reducing Costs

• Choosing higher deductibles can save you money on insurance

• To lower costs for car insurance– Take driver training classes– Maintain a good driving record– Buy more than one insurance policy from

the same company– Own a car with a high safety rating

6-3 Property Protection

Slide 20

Umbrella Insurance

• Provides coverage in addition to car and home insurance

• Protects you from catastrophic losses

• Requires that you have liability coverage on your home and car

6-3 Property Protection

Slide 21

Technology Corner

Buying Insurance Online • Many insurance companies have Web sites • Consumers can apply for insurance online• With some companies, claims can be filed

online• Premiums may be lower with online companies• Be sure that the company is reputable before

buying online

6-3 Property Protection

Slide 22

Ethics

Driving Accidents • Most states have financial responsibility

laws that require drivers to be insured

• Many people drive without insurance in violation of laws

• Driving without being able to pay for damages you cause to others is unethical

6-3 Property Protection