Tutorial 9 - There are 3 main ways to manage risk 1 Reduce...

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There are 3 main ways to manage risk: 1. Reduce or eliminate the risk 2. Retain the risk have enough money in order to cover the risk if it arises 3. Insurance transfer the risk to a company who has enough money to cover you Before taking insurance, there are 3 questions we should ask: 1. Who are my dependents? 2. What is the degree of their dependency? 3. How would their needs change? To determine the amount to insure, there are two methods we can use: 1. Multiple approach Amount of insurance cover = Salary/Investment Rate ADV: o Simple method of calculation DISADV: o Doesn’t take into account the CPI (inflation) o Doesn’t take into account the current resources which are possessed by the dependents o Investment is variable and the method may be TOO simple 2. Needs approach Amount of insurance cover = Need – Resources ADV: o Takes into account the actual needs and current resources DISADV: o Doesn’t take into account the CPI o
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  • Three '10
  • FONG
  • Medicare levy surcharge

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