Describe briefly the steps in the personal risk management process.

(a) A personal risk management program has the following steps:

• Identify loss exposures
• Analyze the loss exposures
• Select appropriate techniques for treating the loss exposures
• Implement and review the program periodicallyb.

Identify the major pure risks or pure loss exposures to which Chris and Karen areexposed with
respect to each of the following:1. Personal loss exposures(1) Major personal loss exposures
include the following:• Premature death of Chris or Karen and the subsequent loss of financial
support tosurviving family members• Catastrophic medical bills incurred by Chris or Karen•
Catastrophic medical bills incurred by Christian or Kelly• Total disability of Chris or Karen and
the subsequent loss of financial support to thesurviving family members2. Property loss
exposures(2) Major property loss exposures include the following:

• Physical damage or theft of household personal property• Physical damage or theft of family cars•
Theft of the laptop computer used by Karen while traveling• Damage or theft of the business computer
used by Chris• Residing in a high crime-rate area, which increases the probability of theft or robbery3.
Liability loss exposures(3) Major liability loss exposures include the following:• Legal liability arising out
of the operation of a family car by family members• Legal liability arising out of the use of a rental car by
Karen when she is traveling• Legal liability arising out of other activities of family members that can
result in bodilyinjury or property damage to othersc. With respect to each of the loss exposures
mentioned above,identify an appropriatepersonal risk management technique that could be used to
treat theexposure.(c) Chris and Karen should purchase adequate life insurance and disability
incomeinsurance to deal with the risk of premature death and total disability. Chris and Karenand the
children should be insured under a group or individual major medical policy todeal with the risk of
catastrophic medical bills. Loss control could also be used bypracticing healthy life style habits.A
homeowners policy would cover the physical damage and theft of household property.Collision and
comprehensive auto insurance would cover the possible physical damageor theft of a family car;
retention could also be used by having a deductible for collisionand comprehensive losses. Chris and
Karen should also check with their insuranceagent to see if their homeowners policy provides adequate
insurance on the businesscomputer and laptop computer. Karen could also use loss control when she is
travelingby not leaving the laptop computer unattended.The legal liability loss exposures can be handled
by a homeowners policy, whichprovides personal liability insurance. Auto legal liability insurance could
insure the legalliability arising out of the negligent operation of a family car by family members.

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