Managing RiskUNIT VII – Personal Financial Literacy
Managing Risk• Every decision we make involves
some type of risk•Driving can result in an accident•A house can burn down after you purchase it•Playing a sport can lead to injuries
• These threats to your safety can happen at any time and are often unexpected• The best way to prepare is to
purchase insurance
Auto Insurance• Provides financial protection against
losses caused by an auto accident or other damage to a car• Examples of Coverage•Collision – provides for repair/replacement of policy owner’s car damage•Liability – covers cost of property damage or injuries to others caused by policy owner•Comprehensive – covers damage that is a result of fire, flood, and theft
Health Insurance• Provides payment for certain health-
care costs including coverage for dental and vision care• Examples of Coverage•Traditional – provides reimbursement for medical expenses; plans included deductibles and copays •HMOs – cover medical services through a specific group of physicians; monthly fee regardless of whether services are used or not•HSA (Health Savings Accounts) – provide pre-tax accounts for medical costs
Renter’s Insurance• Provides financial protection in case of
loss of personal possessions in a rental unit, as well as injury to others on the property
• Protection against financial loss from damage to your home or its contents, as well as injury to others on the property
Homeowner’s Insurance
Life Insurance• Provides financial protection to
dependents of policy owner when policy owner dies (to cover such expenses as income replacement, debt repayment, funeral expenses, and education expenses)
• Provides income over a specified period when a person is ill and unable to work; most disability policies end at retirement age (65-70)
Disability Insurance
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