1. Risk and Insurance

2. 5 Ways to Handle Risk (ARRTS)
Avoid Risk
Retain Risk
Reduce Risk
Transfer Risk
Share Risk

3. Insurance
Insurance – agreement, by a contract, that guarantees payment or replacement if a loss occurs
Transfers Risk – You are not obligated to replace everything lost
Shares Risk – You are splitting the risk with everyone else insured by the insurance company

4. How does it work? Everyone who wants insurance pays
Insurance Company Collects and pools Money
Insurance Company Pays For Accidents

5. How does it work? You pay a payment called a PREMIUM
Typically done monthly or annually
Based on the type of coverage you want and how much insurance you buy
When you need to use your insurance, you first pay a DEDUCTIBLE
This is the amount you are expected to “chip in” towards the final cost

6. How does it work? I insure my house for $200,000.
I pay $500 a year and my deductible is $1,000
A tree falls on the house and the damages cost $6,000 to fix.
I pay $1,000, insurance company pays $5,000

7. Inverse relationship!
Typically, the higher the premium, the lower the deductible and vice versa
Why?

8. How does this work?
Let’s find out!

9. Types of insurance
Automobile: financial protection to the owners, operators and occupants of an automobile in case of accidents or damages. Health: Protects against financial loss caused by the costs of illness or accident. Life: financial protection to a family when the insured dies.

10. Types of insurance
Disability: Provides income during a specified period when a person is unable to work because of illness or an accident. Homeowner’s (Property): Protects the homeowner from loss caused by fire, theft and storm damage of the structure and the possessions within the structure.

11. Which type of insurance would be used to cover the people in each situation?
1. Jose is out of work for 6 months because of a back injury.
2. Chris runs his new car into a telephone pole.
3. Mr. Thomas suffers an injury when a car hits him while he was driving.
4. Mrs. Benefield dies unexpectedly leaving a brand new home and lots of debt.
5. Elan gets an annual checkup at his family doctor.
6. Penny comes home and finds out that someone has stolen her television.
7. The Jacksons need $250 a month for their medication.
8. Sonya broke her leg at work and is out for 3 weeks.
9. A hurricane causes a tree to fall on Jim’s house and, while trying to avoid the tree, Jim trips and cuts his arm and will need medical treatment. (2 types)
10. Sarah swerves off the road to avoid a deer. In doing so, she runs over (and kills) Nick and then bounces off a light pole into Mrs. Stone’s house. Sarah is severely injured and will likely be out of work for quite some time. (ID all 5 types)

12. Weird things insured Bruce Springsteen’s voice
Insurance policy = $6,000,000

13. Weird things insured Troy Polamalu’s Hair
Insurance policy = $1,000,000

14. Weird things insured David Beckham’s Body
Insurance policy = $195,000,000
According to the London Times: The $195 million policy covers him against injury and illness, as well as disfigurement, since many of Beckham's endorsement deals rely on his looks.

15. Weird things insured Mariah Carey’s Legs
Insurance policy = $1 Billion in 2006

16. Weird things insured
Egon Ray’s taste buds
Insurance policy = $47,000

17. Weird things insured Cold Feet?
Firemen’s Fund insurance insures weddings against weather, injury, missing caterer, etc
In 2007 they added “change of heart” to the policies

18. Weird things insured
Many Japanese golfers get “hole in one” insurance

19. Weird things insured
There are over 400,000 existing policies that cover Alien abduction

20. Really? Apocalypse insurance
The world ends? Don’t worry, you’re covered.
At least 500 policies exist