Chapter 11 - Benefit is protection from financial loss Risk...

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Chapter 11: Auto and Homeowner’s Insurance Chapter Objectives Explain the role of risk management Outline typical provisions of auto insurance Describe financial coverage provided by homeowner’s insurance Background on Insurance Insurance protects you against potential financial losses or liability as a result of unexpected events Its primary function is to maintain your existing level of wealth Insurance is beneficial even when no payments are received from the insurance company Managing Risk Risk: exposure to events or perils that can cause financial loss Risk management: decisions about whether and how to protect against risk Avoid risk Reduce risk Managing Risk (cont’d) Accept risk Feasible when likelihood of financial loss is low Insure against risk Premium: the cost of obtaining insurance
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Unformatted text preview: Benefit is protection from financial loss Risk management decisions affected by degree of risk tolerance Managing Risk (cont’d) Economic impact on the decision to insure against risk When economic conditions are favorable, people are willing to purchase or increase insurance coverage When economic conditions are weak, they tend to reduce insurance Consider the possible danger in reducing insurance coverage Role of Insurance Companies Types of insurance Many types of insurance available Most popular forms are property and casualty insurance, life insurance and health insurance Insurance company operations Relationship between insurance companies and premiums Role of Insurance Companies (cont’d)...
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