Chapter 25 Introduction to Risk Management MYPF CHAPTER 25 13-SEPT-2001 Chapter 25 Introduction to Risk Management What Is Insurance? Risk Management? © South-Western Educational Publishing

Spreading the Risk Insurance is a method for spreading individual risk among a large group of people to make losses more affordable for all. © South-Western Educational Publishing

Insurance Terminology p. 607 Actuarial table Actuary Beneficiary Benefits Cash value Claim Coverage Deductible Exclusions Face amount Grace period Hazard Insurance agent Insured Loss Peril Proof of loss Standard policy Unearned premium © South-Western Educational Publishing

Insurable Risks Personal risks Property risks Are the chances of loss involving your income and standard of living. Ex life, health and disability insurance Property risks The chances of loss or harm to personal or real property. Ex home, and car insurance © South-Western Educational Publishing

Insurable risk cont. Liability risks Are the chances of loss that may occur when your errors or inappropriate actions result in bodily injury to someone else or damage to someone else property. © South-Western Educational Publishing

Risk Management Is an organized strategy for controlling financial loss from pure risks. © South-Western Educational Publishing

Risk-Management Process Step 1: Identify risks of loss Pure risk Chance of loss with no chance of gain ( usually insurable) Speculative risk A risk that may result in either gain or loss. Ex stock Step 2: Assess seriousness of risks © South-Western Educational Publishing

Risk-Management Process Step 3: Handle risks Risk avoidance Eliminate by not doing the activity. Risk reduction Ex. Put seat belt on Risk assumption Establish monetary fund to cover loss Risk transfer (shift) © South-Western Educational Publishing

Making a Risk-Management Plan List identified risks. List assessment of risks’ financial impact. List techniques to manage each risk. © South-Western Educational Publishing

Reducing Insurance Costs Increase deductibles. Purchase group insurance. Consider payment options. Look for discount opportunities. Comparison shop. © South-Western Educational Publishing

Chapter 26 Property and Liability Insurance MYPF CHAPTER 26 13-SEPT-2001 Chapter 26 Property and Liability Insurance Property Insurance Automobile and Umbrella Insurance © South-Western Educational Publishing

Lesson 26.1 Property Insurance Explain the purpose of renter’s and homeowner’s insurance. Describe fire, theft, and other forms of property insurance policies. © South-Western Educational Publishing

Renter’s Insurance Property risk Liability risk © South-Western Educational Publishing

Homeowner’s Insurance How much coverage do you need? Physical damage coverage Theft and vandalism coverage Liability coverage © South-Western Educational Publishing

Homeowner’s Policies HO-1 Basic Coverage HO-2 Broad Form HO-3 Special Form HO-4 Renter’s HO-5 Comprehensive HO-6 Condominium Owner’s HO-7 Older Homes © South-Western Educational Publishing

Lesson 26.2 Automobile and Umbrella Insurance Discuss common types of automobile insurance coverage. Explain the concept of liability insurance and an umbrella policy. © South-Western Educational Publishing

Automobile Insurance Cost of automobile insurance Types of automobile insurance coverage No-fault insurance Assigned-risk policies © South-Western Educational Publishing

Cost of Automobile Insurance Model, style, and age of car Driver classification Location Distance driven Purpose of driving Age and sex of other regular drivers of the car © South-Western Educational Publishing

Types of Automobile Insurance Coverage Liability coverage Collision coverage Comprehensive coverage Personal injury protection (PIP) Uninsured/underinsured motorist coverage © South-Western Educational Publishing

Umbrella Liability Insurance Personal catastrophe policy Supplements your basic auto and property liability coverage © South-Western Educational Publishing

Chapter 27 Health and Life Insurance MYPF CHAPTER 27 13-SEPT-2001 Chapter 27 Health and Life Insurance Health Insurance Disability and Life Insurance © South-Western Educational Publishing

Lesson 27.1 Health Insurance Describe group and individual health insurance plans. Discuss common types of health insurance coverage and plans. Explain Medicare and Medicaid coverage. © South-Western Educational Publishing

Group and Individual Health Plans Group policies Group health insurance COBRA Coordination of benefits Individual policies © South-Western Educational Publishing

Types of Health Insurance Coverage Basic health insurance Major medical expense insurance Dental and vision insurance © South-Western Educational Publishing

Private Health Plans Unmanaged (traditional fee-for-service) plans Managed-care plans Preferred provider organization (PPO) Health maintenance organization (HMO) © South-Western Educational Publishing

Health Savings Accounts Set aside money to pay medical expenses not paid by insurance. Contributions are tax deductible. Employer may contribute to account. © South-Western Educational Publishing

Medicare and Medicaid Medicare: Government-sponsored health insurance for people age 65 or older Medicaid: Government-sponsored health insurance for people with low incomes and limited resources © South-Western Educational Publishing

Lesson 27.2 Disability and Life Insurance Discuss different types of disability insurance. Describe the characteristics of different life insurance plans. © South-Western Educational Publishing

Disability Insurance Group disability insurance Social security disability insurance Workers’ compensation insurance © South-Western Educational Publishing

Life Insurance Provisions of life insurance policies Types of life insurance Temporary life insurance Permanent life insurance © South-Western Educational Publishing