THE RISK MANAGEMENT PROCESS TO ADDRESS THE
RISK TO PROPERTY AND INCOME
For most individuals, there are two primary asset types that
can be described broadly as human capital and financial
capital.
● Human capital is the net present value of the
individual’s future expected labor income. (income)
● Financial capital consists of assets currently owned
by the individual and can include such items as a bank
account, individual securities, pooled funds, a
retirement account, and a home. (property)
Risk is defined as the possibility of a hazard actually causing
harm. Risk refers to the uncertainty that something may result
in a loss or injury.
Some of Types of Risk
● Earnings risk refers to the risks associated with the
earnings potential of an individual—that is, events that
could negatively affect someone’s human and financial
capital.
● Liability risk refers to the possibility that an individual
or other entity may be held legally liable for the
financial costs of property damage or physical injury.
● Property risk relates to the possibility that one’s
property may be damaged, destroyed, stolen, or lost.
There are different types of property insurance,
depending on the asset, such as automobile insurance
and homeowner’s insurance.
Risk Management Process is a clearly defined method of
understanding what risks and opportunities are present, how
they could affect an individual's finances and how to respond
to them.
Four key steps in the risk management process
● Specify the objective
● Identify risks
● Evaluate risks and select appropriate methods to
manage the risks
● Monitor outcomes and risk exposures and make
appropriate adjustments in methods.
BASIC INSURANCE TERMS
A claim is a request for payment within an insurance policy,
such as a homeowners insurance claim for hail damage to
their roof.
Limits are the maximum insurance company's agreed-upon
coverage amount for a specific claim, which is determined
before policy issue and can be found on the policy declaration
page.
Beneficiary is a person who is designated to receive payment
for a life insurance benefit.
Assured refers to an individual who has an insurance policy,
also known as an insured or policyholder.
An insurer is the company or organization that provides
insurance policies to the insured. This is another word for an
insurance company, like the term "carrier."
RELATIONSHIP BETWEEN RISK AND INSURANCE
Risk Management involves more than just insurance; a loss,
whether insured or uninsured, can have significant financial
consequences for an organization, including repair costs,
income loss, and additional expenses.
A HOMEOWNER'S OR RENTER'S INSURANCE PROGRAM
TO MEET NEEDS
Homeowners insurance policies generally cover destruction
and damage to a residence's interior and exterior, the loss or
theft of possessions, and personal liability for harm to others.
Different Types of Homeowners Coverage
Actual Cash Value
Replacement Cost
Guaranteed (or Extended) Replacement Cost/Value
Renters insurance is a form of property insurance that covers
losses to personal property and protects the insured from
liability claims.
What Renters Insurance Covers
Personal Possessions
Liability
Additional Living Expenses
AN AUTOMOBILE INSURANCE PROGRAM TO MEET
NEEDS
Car insurance is effectively a contract between yourself and
an insurance company in which you agree to pay premiums in
exchange for protection against financial losses stemming
from an accident or other damage to the vehicle.
Auto insurance can offer coverage for:
● Vehicle damages, including your car or another driver's
vehicle
● Property damage or bodily injuries caused by an
accident
● Medical bills and/or funeral expenses associated with
injuries sustained in an accident
OTHER TYPES OF PROPERTY AND LIABILITY
INSURANCE AND SUMMARY HOW TO MAKE AN
INSURANCE CLAIM
Other types of property
● Health insurance
● Life insurance
Liability insurance is a general term to describe different
types of insurance coverage that helps protect you or your
business if someone files a lawsuit or reports a claim against
your company.
An Insurance claim is a request to the insurance company for
payment after a policyholder experiences a loss covered by
their policy.
7 steps to file a home or auto claim
Step 1: File a police report
Step 2: Document any damage
Step 3: Review your coverage
Step 4: Contact your insurance company
Step 5: Prepare for the insurance adjuster
Step 6: Review the settlement offer
Step 7: Receive the claim payment and repair the damage
https://www.cfainstitute.org/en/membership/professional-devel
opment/refresher-readings/risk-management-individuals
https://www.migso-pcubed.com/blog/risk-management/four-ste
p-risk-management-process/
https://germaniainsurance.com/blogs/post/germania-insurance
-blog/2022/02/28/insurance-definitions-45-basic-insurance-ter
ms-everyone-should-know
https://langara.ca/departments/recreation/documents1/RMandI
nsurance.pdf
https://www.investopedia.com/insurance/renters-insurance/
https://www.investopedia.com/insurance/homeowners-insuran
ce-guide/