1. Personal Finance Garman/Forgue Ninth Edition
Chapter 10: Managing Property and Liability Risk
PPT slide program prepared by Amy Forgue and Ray Forgue.

2. Learning Objectives
Apply the risk-management process to address the risks to your property and income.
Explain basic insurance terms and the relationship between risk and insurance.
Design a homeowner’s or renter’s insurance program to meet your needs.
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3. Learning Objectives
Design an automobile insurance program to meet your needs.
Describe other types of property and liability insurance.
Summarize how to make an insurance claim.
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4. Introduction Property Insurance Liability Insurance
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5. Risk and Risk Management
What is the nature of risk?
Speculative risk
Pure risk
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6. The Risk-Management Process
Step 1: Identify sources of risk.
Peril: Event that can cause a financial loss
Step 2: Estimate risk and potential losses.
Loss frequency
Loss severity
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7. The Risk-Management Process
Step 3: Choose how to handle risk.
Risk Avoidance
Risk Retention
Loss Control
Risk Transfer
Risk Reduction
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8. The Risk-Management Process
Step 4: Implement the risk-management program.
Large-Loss Principle: Insure the losses that you cannot afford, pay the small losses out of your own pocket.
Step 5: Evaluate and adjust the program.
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9. Understanding How Insurance Works
Premium
Insurance Policy
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10. Understanding How Insurance Works
Hazards make losses more likely to occur.
Hazard: Any condition that increases the probability that a peril will occur.
Only certain losses are insurable.
Fortuitous losses
Financial loss
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11. Understanding How Insurance Works
The Principle of Indemnity Limits
Principle of indemnity
Policy limits
Factors that reduce the cost of insurance:
Deductibles
Coinsurance
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12. Understanding How Insurance Works
The essence of insurance
Law of large numbers
Who sells insurance?
Insurance agent
Independent insurance agents
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13. Homeowner’s Insurance
Coverages
Property insurance
Named-perils policies
All-risk (open-perils) policies
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14. Homeowner’s Insurance
Liability insurance
Homeowner’s general liability protection
Homeowner’s no-fault medical payments protection
Homeowner’s no-fault property damage protection
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15. Types of Homeowner’s Insurance Policies
Basic Form (HO-1)
Broad Form (HO-2)
Special Form (HO-3)
Renter’s Contents Broad Form (HO-4)
Condominium Form (HO-6)
Older Home Form (HO-8)
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16. Buying Homeowner’s Insurance
How much coverage is needed on your dwelling?
Replacement-cost requirement
How much coverage is needed on your personal property?
Actual cash value (of personal property)
Contents replacement-cost protection
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17. Automobile Insurance – Losses Covered
Coverage A: Liability insurance
Automobile Bodily Injury Liability
Automobile Property Damage Liability
Family Auto Policy (FAP)
Personal Auto Policies (PAP)
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18. Automobile Insurance – Losses Covered
Coverage B: Medical payments insurance
Automobile medical payments insurance
Personal Injury Protection (PIP)
Subrogation rights
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19. Automobile Insurance – Losses Covered
Coverage C: Uninsured and underinsured motorist insurance
Uninsured motorist insurance
Underinsured motorist insurance
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20. Automobile Insurance – Losses Covered
Coverage D: Physical damage insurance
Collision insurance
Comprehensive automobile insurance
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21. Automobile Insurance – Losses Covered
Other protections:
Towing coverage
Rental reimbursement coverage
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22. Protection for Other Property and Liability Loss Exposures
Comprehensive personal liability insurance
Professional liability insurance
Professional liability insurance (or malpractice insurance)
Umbrella (or excess) liability insurance
Floater Policies
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23. How to Collect on Your Property and Liability Losses
Contact your insurance agents.
Document your loss.
File your claim.
Claim adjuster
Sign a release.
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24. The Top 3 Financial Missteps In Managing Property and Liability Risk
People slip up in when they do the following:
1. Buy only the legal minimum coverage on the liability insurance on their car.
2. Fail to keep good records that could serve to document insured property losses.
3. Pay high premiums because they select low deductibles on property insurance.
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25. Good Money Habits in Managing Property and Liability Risk
Always insure your home and vehicle.
Purchase insurance policies with very high liability limits to protect against the possibility of catastrophic losses.
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26. Good Money Habits in managing Property and Liability Risk
Verify that your auto insurance policy covers rental car losses so you can wisely ignore sales pressure to purchase such overpriced coverage.
Always comparison shop for insurance locally as well as online.
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27. Good Money Habits in managing Property and Liability Risk
Maintain a verifiable inventory of all your insured property so that you can collect what is coming to you in the event of a loss.
Once each year, reassess what types of and how much insurance coverage you need.
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