Risk & Protection

Insurance claims involving teens 100% higher than adults

Teen crash rates drop 40% 6 months after getting license

75% of Americans experience some form of disability this year

At work, a disabling accident occurs every 8 seconds

Risk is the chance of financial loss from perils to property or people

Insurance is a method for spreading individual risk among a large group of people to make losses more affordable to all

Important in financial planning

Common Exposures to LossCommon Exposures to Loss

UNLIMITED LOSS

Becoming sick (lost wages)

Dying prematurely (loss of income for family)

Becoming disabled (lost wages)

Insurer is a company that agrees to pay the cost of potential future losses in exchange for regular fee payments

Policy a written insurance contract

Premium is a fee paid for the insurance policy. Usually paid at regular intervals by the owner of the policy (policyholder). These are determined by actuaries.

Important to have right kind of insurance at the right time

Beware of under insured or over insured

Hazard: A condition that creates or increases the likelihood of some loss Example: lightning or

defective wiring can cause a fire

Peril: An event whose occurrence can cause a loss. Example: Fire, storm,

explosions, robbery, accident

Loss: Unexpected reduction in insured property, caused by a peril. Example: Crushed car caused

by a storm

Waste of current income

Other needs might go unmet

Insurance is not meant to enrich; only to compensate for actual losses incurred.

This principle is called indemnification.

Personal risksTake safety precautions, like wear a

helmet Avoid risky behaviors altogether

Stop hanging out with friends who smoke or drink; go do something else

Reduce/avoid property risks Install smoke detectors in your homeUse your burglar alarm

Means putting the policyholder back in the same financial condition he or she was in before the loss occurred

Probability is the mathematics of chance and the root of indemnification.

Every event can be described in terms of probability or likelihood that something will happen

Risks that can be big losses Large loss is a cost

that would create financial hardship ▪ Medical bills

Small loss is inconvenient▪ car repair

Should change with time Life insurance for married spouse & kids Disability if head of household Liability on 1st car (used)

Your ageYour age

Make of carMake of car

Marital statusMarital statusDo you take the car to work?Do you take the car to work?

If you’re a good studentIf you’re a good student

GenderGender

Where you liveWhere you live

How much How much you use the you use the

carcarCredit ratingCredit rating

Driver’s educationDriver’s education

Driving recordDriving recordType of carType of car

6-F6-F

1. Help manage financial losses2. Professional risk takers3. Spread risk among people4. Policyholders pool premium in reserves so those

suffers can be compensated5. Predictable cost for company

Might want to consider if driving older car

Deductible might be higher than insurance company will pay The cars value

Shop at least three places; compare rates and policies; ask about discounts and special rates.

Read sources of information such as Consumer Reports®.

Purchase more than one type of insurance from the same company; insure all cars with the same company.

Let’s get ready to BUNDLE!

Let’s get ready to BUNDLE!

Importance? Single greatest asset is potential earning

power

Pays income if policy holder gets sick and can’t work

Limited to 2/3 gross income

Designed to encourage return to work ASAP

Protects from losses to: House, garage, furniture, other personal

property

Cover losses due to fire, weather damage, theft, vandalism

Also pays cost of living elsewhere while home is being rebuilt or repaired

Can buy additional coverage against floods, earthquakes, jewelry, expensive paintings etc. called a rider

Never covers acts of war

Typically insure structure for 80% of its value

Renters insurance same coverage as homeowner’s policy except doesn’t cover structure just contents inside

BUY RENTERS INSURANCE

You better shop around! WHY? Because I said

so!

The way to get the best deal is to shop around the different companies. Their prices and coverage vary greatly!