1. Chapter 6 Personal Risk Management

2. 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

3. What Is Risk? Slide 3 6-1 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 physical injury, damage to property, or disappearance of assets.

4. 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

5. How Can You Manage Risk Using Risk Strategies? Pg 188-189 Slide 5 6-1 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)

6. Risk Assessment Slide 6 6-1 Risk Assessment and Strategies Risk Probability of Occurrence Seriousness Rating* Possible Consequences Losing my jobMedium10  Missed payments  Lower credit rating Getting in a car accident Unknown10  Personal injury  Lawsuit Suffering physical injury from snowboarding Medium3  Missed work time  Medical bills Having bike stolen Low2  New/used bike purchase * 1 is low risk; 5 is medium risk; 10 is high risk

7. 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.

8. Health Care Types  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

9. What Is the Purpose of Disability Insurance? Slide 9 6-2 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.

10. What is Life Insurance? Slide 10 6-2 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:

11. 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

12. 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

13. 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 hazards o Criminal activity o Personal Liability (when others are injured on your property) Acts of nature may not be covered. 6-3 Protecting Property

14. 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!

15. Home Inventory Slide 15 6-3 Protecting Property Create a home inventory in case you need to file a claim.

16. How Does Insurance Protect Car Owners? Slide 16 6-3 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.

17. Types of Auto Insurance Coverage Full coverage is required if you have a car loan. It includes: o Liability o Collision o Comprehensive o Personal injury protection o Uninsured/Underinsured Motorist o Towing/Rental Car  Go to pages 208-209 in textbook for descriptions

18. 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

19. How Can You Reduce Auto Insurance Costs and Maximize Benefits? Slide 19 6-3 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.

20. *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

21. Slide 21 TODAY in Fin Lit: Book Q&A : Pg.192: 17, 24 Pg. 213: 16, 23 Finish Key Terms

22. Unit 2 Test*: Wed, 4/23 – Blocks C and G Thurs, 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 1 st day back from break Slide