Personal Finance Chapter 8
Risk Management Techniques
-Avoidance -Reduction -Assumption -Shifting
Main Bodily Injury Coverages:
-Bodily injury liabilty -medical payments coverage -uninsured motorist protection
Example of Risk Reduction actions:
-Installing smoke alarms to alert about a potential fire -wearing a seat belt to reduce serious injuries
True.
-Insurance companies can use credit scores in underwriting. -Insurance companies can use credit scores in determining prices of auto insurance coverage -Insurance companies must tell you if they take adverse action against you due to your credit report.
Risk Assumption:
-Taking responsibility for the negative results of a risk -example: self-insuring; deciding not to purchase collision insurance
Insurance Company:
A risk-sharing firm that assumes financial responsibility for losses that may result from an insured risk.
Risk Management Methods
An organized plan for protecting yourself. reduces financial losses cause by destructive events.
Hazard:
Anything that increase the likelihood of loss through some peril
Property and personal damage
Automobile insurance covers _ & _ caused buy the policy holders car
Risk:
Chance of loss or injury
Risk Avoidance:
Choosing never to drive to work is an example because you will avoid the risk of getting a traffic accident.
Physical Damage
Comprehensive insurance for your car covers... to your car from such risks as fire, theft, hitting an anomial
Homeowner's Insurance:
Coverage for your place of residence and its associated financial risks such as damages to personal property and injuries to others
Other Structures, House, and Personal Property are...
Covered by a home owner's policy.
Second Type of Risks:
Criminal behaviors
Personal Risk:
Involves loss of income or life due to illness, disability, old age, or unemployment
Main Influences of insurance:
Location of Home Type of Insurance Policy Type
Financial impact of Death:
Loss of one income Loss of services Final Expenses
Property Risks:
Loss of property cause by fires, theft, hazards
Vehicle type, rating territory, driver classification are...
Main factors that influence premiums for automobile insurance.
Driver Classification:
Martial Status, Driving Record, Age and Sex
Insurance:
Protection against possible financial loss.
Claims:
Requests for payment to cover financial losses.
Insurance Protection for your Home:
Should be based on the amount needed to rebuild/repair your house and not the amount you originally paid for the home.
Umbrella Policy/Personal Catastrophe Policy:
Supplements your basic personal liability coverage Ex:will cover you if someone sues you for saying something negative/untrue for damaging heir rep.
Premium:
The amount of money a policy holder is charged for an insurance policy
Peril:
The cause of a possible loss.
Negligence:
The failure to take ordinary or reasonable care to prevent accidents from happening.
Liabilities:
The legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible
Liability...
The legal responsibility for the financial loss due to injuries to others or damage to property for which you are responsible.
Liability:
The legal responsibility for the financial loss due to injuries to others or damage to property for which you are resposibibe
Pure/ Insurable Risk:
Types of Risks: Personal, Property, and Liability The insurance company will have to pay only if some event that the insurance covers actually happens. Accidental and Unintentional
Household Inventory:
a list or other documentation of personal belongings with purchase dates and cost information
Personal Property Floater:
additional property insurance to cover the damage or loss of a specific item of high value
Physical Damages:
fire, wind, water, smoke
The goals of insurance are...
minimizing personal, liability, and property risks.
With the replacement value method of insurance coverage you will receive:
the full cost of repairing or replacing a damaged or lost item
