1. Chapter 6 Personal Risk Management

2. What Is Risk? Risk is the chance of injury, damage, or economic loss.
Probability is the likelihood of a risk.
A loss refers to physical
injury, damage to property, or disappearance of assets.
6-1 Risk Assessment and Strategies
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3. What Are the Types of Consumer Risk?
Personal risk means you could lose something of personal value.
Example: breaking a leg  missing fun activity
Some risks result in a financial loss.
Example: driving without insurance  paying a lot of money to repair car
Some risks jeopardize financial resources.
Example: getting sued for causing an injury to another  having your wages garnished to pay for judgment against you
6-1 Risk Assessment and Strategies
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4. How Can You Manage Risk Using Risk Strategies?
Risk assessment involves identifying risks and deciding how serious they are.
Use risk strategies to protect yourself against loss.
Reduce risk (change your actions)
Avoid risk (stop a certain behavior)
Transfer risk (buy insurance)
Assume risk (self-insure)
6-1 Risk Assessment and Strategies
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5. Risk Assessment Risk Probability of Occurrence Seriousness Rating*
Possible Consequences
Losing my job
Medium 10
Missed payments
Lower credit rating
Getting in a car accident
Unknown
Personal injury
Lawsuit
Suffering physical injury from snowboarding 3
Missed work time
Medical bills
Having bike stolen
Low 2
New/used bike purchase
* 1 is low risk; 5 is medium risk; 10 is high risk
6-1 Risk Assessment and Strategies
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6. Why Do You Need Health Insurance?
Health insurance is a plan for sharing the risk of medical costs.
There are three basic types of plans.
Fee-for-service
PPO
HMO
Medicare and Medicaid are government-sponsored insurance.
6-2 Protecting Income
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7. What Is the Purpose of Disability Insurance?
Disability insurance provides income when the insured cannot work due to nonwork-related injury or illness.
It replaces a portion of normal earnings.
Short-term, long-term, and social security disability insurance are all options.
6-2 Protecting Income
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8. Who Needs Life Insurance?
Life insurance pays money to a beneficiary upon the death of the insured person.
Temporary insurance provides a death benefit only.
Permanent insurance provides a death benefit and builds cash value.
Group life insurance is available through employers.
6-2 Protecting Income
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9. Focus On . . . Health Care Reform
Most Americans will have insurance by 2020.
Purchasing health insurance will be mandatory.
Citizens cannot be denied coverage for pre-existing conditions.
Tax increases will pay for health care reform.
A major omission from the reform is a control on health care costs.
6-2 Protecting Income
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10. Success Skills Dealing With Health Care Fraud
Health care fraud is false billing for medical services.
Examples: falsifying a diagnosis to justify unneeded tests, upcoding, unbundling
Ten cents of every dollar goes toward fraudulent health care claims.
Consumers can help prevent fraud.
Examples: ask questions about services and charges, audit bills, report suspected fraud
6-2 Protecting Income
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11. What Is Homeowner’s Insurance?
Homeowner’s insurance protects the policyholder from risk of loss to a home and its contents.
It covers three types of risk.
Fire and other hazards
Criminal activity
Personal Liability
Acts of nature may not be covered.
6-3 Protecting Property
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12. Home Inventory
Create a home inventory in case you need to file a claim.
6-3 Protecting Property
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13. How Does Insurance Protect Car Owners?
Automobile insurance protects a car owner from losses as a result of accidents and other events.
Cost depends on model and style of car, age, and driving record of driver.
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14. Types of Coverage
Full coverage is required if you have a car loan. It includes:
Liability
Collision
Comprehensive
Personal injury protection
Uninsured/Underinsured Motorist
Towing/Rental Car
6-3 Protecting Property
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15. How Can You Reduce Insurance Costs and Maximize Benefits?
Reducing costs can raise overall risk.
Lower costs using strategies such as higher deductibles, buying online, or comparison shopping.
Maximize benefits by reviewing your policy or getting umbrella coverage.
6-3 Protecting Property
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