1. Copyright 2007 Thomson South-Western Chapter 6 Personal Risk Management

2. 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

3. Slide 3 Risk Assessment Identify the risks Decide how serious they are 6-1 Risk Assessment and Strategies RISK EXAMPLES Risk Probability of Occurrence Seriousness Rating* Possible Consequences Losing my jobMedium10Payments could be missed. Credit rating suffers. Car accidentUnknown10Personal injury Lawsuit Physical injury from snowboarding Medium3Missed work time Medical bills *1 is a low risk; 5 is a medium risk; 10 is a high risk

4. 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.

5. 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

6. 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

7. 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

8. 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.

9. Slide 9 Managing Costs Deductibles and co-pays Stop-loss provisions Health savings accounts 6-2 Income Protection Medical emergencies can be very expensive.

10. 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

11. 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

12. 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.

13. 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

14. 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

15. 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

16. Slide 16 Sample Home Inventory 6-3 Property Protection

17. 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 way to manage risk 6-3 Property Protection Renter’s insurance protects you from losses as a result of fire.

18. 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

19. 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

20. 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

21. 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

22. 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