Chapter 6 Personal Risk Management. Chapter 6 Objectives Explain the concepts of risk and list the 3 types of consumer risk Describe risk assessment and.

Chapter 6

Personal Risk Management

Chapter 6 Objectives

Explain the concepts of risk and list the 3 types of consumer risk

Describe risk assessment and list 4 risk strategies

Explain the need for insurances protecting income and the types of plans available for each: Health Insurance Disability Insurance Life Insurance

Explain the needs and types of insurance protecting property:

• Homeowners/Renters Insurance• Auto Insurance

Slide 2

What Is Risk?

Slide 36-1 Risk Assessment and Strategies

• Risk is the chance of injury, damage, or economic loss.

• Probability is the likelihood of a risk.

• A loss refers to physicalinjury, damage to property, or disappearance of assets.

What Are the Types of Consumer Risk?

Personal risk means you could lose something of personal value.o Example: breaking a leg missing fun activity

Some risks result in a financial loss.o Example: driving without insurance paying a lot

of money to repair car

Some risks jeopardize financial resources.o Example: getting sued for causing an injury to

another having your wages garnished to pay for judgment against you – this affects future assets and is serious

Slide 4 6-1 Risk Assessment and Strategies

How Can You Manage Risk Using Risk Strategies? Pg 188-189

Slide 56-1 Risk Assessment and Strategies

• Risk assessment involves identifying risks and deciding how serious they are.

• Use risk strategies to protect yourself against loss.o Reduce risk (change your actions)o Avoid risk (stop a certain behavior)o Transfer risk (buy insurance)o Assume risk (self-insure)

Risk Assessment

Slide 66-1 Risk Assessment and Strategies

RiskProbability of Occurrence

SeriousnessRating*

PossibleConsequences

Losing my job Medium 10 Missed payments Lower credit rating

Getting in a car accident

Unknown 10 Personal injury Lawsuit

Suffering physical injury from snowboarding

Medium 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

Why Do You Need Health Insurance?

Slide 7

• Health insurance is a plan for sharing the risk of medical costs.

• There are three basic types of plans.o Fee-for-service(Unmanaged Care)

o PPO (MANAGED CARE)

o HMO(MANAGED CARE)

• Medicare and Medicaid are government-sponsored insurance.

Health CareTypes

Basic Health Care- medical, hospital, surgery

Major Medical- very serious injury or illness

Dental and Vision

Long-term care – for nursing homes and assisted living

Managing Costs Deductibles and Copays- the

part you pay. If lower, then insurance premium is higher

Stop-Loss Provisions- after you pay a certain amount, insurance pays 100%

Health Spending Accounts FSA-flexible spending

account HSA- health savings

account

Slide 8

What Is the Purpose of Disability Insurance?

Slide 96-2 Protecting Income

• 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.

What is Life Insurance?

Slide 106-2 Protecting Income

• Life insurance pays money to a beneficiary upon the death of the insured person.

• Temporary or Term insurance provides a death benefit only.

• Permanent insurance provides a death benefit and builds cash value.

• Group life insurance is available through employers.

See page 199 in textbook for list of reasons people buy life insurance:

Focus On . . .

Slide 11

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

Success Skills

Slide 12

Dealing With Health Care Fraud

6-2 Protecting Income

• Health care fraud is false billing for medical services.o 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.o Examples: ask questions about services and

charges, audit bills, report suspected fraud

What Is Homeowner’s Insurance?

Slide 13

• Homeowner’s insurance protects the policyholder from risk of loss to a home and its contents.

• It covers three types of risk.o Fire and other hazardso Criminal activityo Personal Liability(when others are injured on

your property)

• Acts of nature may not be covered.

6-3 Protecting Property

What if I rent, not own?... **Buy Renter’s Insurance

A renter (tenant) cannot insure the building BUT you can insure your contents.

Always purchase renter’s insurance to protect against risk of loss of personal property.

Just like a homeowners policy, cover things like fire, theft, and other hazards.

Includes personal liability coverage for what happens inside your residence.

Renter’s insurance even covers your property in your car or at work! **A LOW COST way to protect your stuff!

Home Inventory

Slide 156-3 Protecting Property

Create a home inventory in case you need to file a claim.

How Does Insurance Protect Car Owners?

Slide 166-3 Protecting Property

• 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 gender)• driving record of driver.

Types of Auto Insurance Coverage

• Full coverage is required if you have a car loan. It includes:o Liabilityo Collisiono Comprehensiveo Personal injury protectiono Uninsured/Underinsured Motoristo Towing/Rental Car

Go to pages 208-209 in textbook for descriptions

Types of Auto Insurance Coverage

o Liability: covers injury or damage to another person’s property (when you are at fault)

o Collision: covers damage to your own vehicle if you hit someone, or lose control (when you’re at fault)

o Comprehensive: covers losses other than collision like falling objects, theft, vandalism, hail, fire

o Personal injury protection: covers medical, hospital costs of the insured and others in your car

o Uninsured/Underinsured Motorist: covers you if someone doesn’t have insurance and they are at fault

o Towing/Rental Car: optional but good to have

How Can You Reduce Auto Insurance Costs and Maximize Benefits?

Slide 196-3 Protecting Property

• Reducing costs can raise your overall risk but it can help you manage your budget.

• Lower your costs using these strategies:

choose higher deductibles change your driving habits* buy online comparison shop

• Maximize benefits by reviewing your policy or getting umbrella coverage.

*Change your driving habits

Lower your premium costs

Take driving training class

Maintain good driving record

Get good grades in school

Choose a car with high safety rating

Install security devices on your car

Park in garage or protected area

Reduce risk of accidents

Drive while rested instead of when tired

Keep your car properly serviced

Avoid heavy traffic or bad weather

Drive defensively; be aware of other drivers

Avoid using cell phones, eating or other distractions

Slide 20

Slide 21

TODAY in Fin Lit:

Book Q&A :

Pg.192: 17, 24

Pg. 213: 16, 23

Finish Key Terms

Unit 2 Test*: Wed, 4/23 – Blocks C and GThurs, 4/24 – Blocks D and F

*Notebook check also

Unit 2 Test Covers:

Chapter 4 – Budget and Financial Planning

Chapter 5 – Banking System

Chapter 6 – Risk Strategies and Insurance

Be ready for Jeopardy 1st day back from break

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