In class this week, we familiarized ourselves with property and liability insurance and how they can be used to manage risk. We discussed how to identify, eliminate, and handle risk by implementing a risk-management program.
When trying to manage the risk involved in particular assets, individuals must identify sources of risk, estimate the risk and potential losses, choose how to handle risk, implement the risk-management program, and evaluate and adjust the program accordingly. Once one has determined which assets it will insure, such as one's home and automobile, he/she should verify that they fully understand how insurance works. If in need of assistance, insurance agents work to match insurers to individuals in need.
Homeowners insurance consists of two components: property and liability insurance. Currently six basic homeowner's policies exist; each vary in the amount of coverage provided and type of insured residence. Dwellings, other structures of the residence, personal property, and loss of use are protected under section 1 of homeowners insurance, property coverage. Personal property coverage is limited to 50% of the home's coverage. Cash, gold, and silver are only covered up to $200, while securities, tickets, and stamps are limited to $1000. Additionally, if one's home becomes inhabitable, loss of use coverage will only provide a max of 20% of coverage on the home. If a homeowner requires greater coverage than a typical plan, umbrella policies and supplemental coverage options are available.
Personal automobile policies (PAP) are available to car owners from a considerable number of insurers and are legally required if someone owns or operates a vehicle in most states. Automobile insurance policies can include four coverages: liability, medical expense, uninsured motorist's protection, and coverage for damage to the policy owner's car. A few standard exclusions to automobile coverage are intentional damage, use without permission, vehicles with less than four wheels, driving in a race, etc. When purchasing vehicle insurance, buyers should be wary of the factors that affect the cost of insurance such as the type of automobile, use of the vehicle, the owner's personal characteristics and driving record, location of residence, and qualified discounts. Lastly, in order to keep the cost of insurance low, vehicle owners should window shop before purchasing a policy, consider only high-quality insurers, use discounts, keep a clean driving record, and raise their deductibles.
In conclusion, owning any asset causes the owner to absorb some level of risk, whether systematic or pure; therefore, in order to decrease the likelihood of facing a financial loss because of a catastrophic event, insurance is accessible as a method for mitigating one's downside risk.
Article 1 - 5 Steps to Help Create an Estate Plan
Article 2 - Planning for Incapacity: 4 Important Documents
(October 21-27)
When trying to manage the risk involved in particular assets, individuals must identify sources of risk, estimate the risk and potential losses, choose how to handle risk, implement the risk-management program, and evaluate and adjust the program accordingly. Once one has determined which assets it will insure, such as one's home and automobile, he/she should verify that they fully understand how insurance works. If in need of assistance, insurance agents work to match insurers to individuals in need.
Homeowners insurance consists of two components: property and liability insurance. Currently six basic homeowner's policies exist; each vary in the amount of coverage provided and type of insured residence. Dwellings, other structures of the residence, personal property, and loss of use are protected under section 1 of homeowners insurance, property coverage. Personal property coverage is limited to 50% of the home's coverage. Cash, gold, and silver are only covered up to $200, while securities, tickets, and stamps are limited to $1000. Additionally, if one's home becomes inhabitable, loss of use coverage will only provide a max of 20% of coverage on the home. If a homeowner requires greater coverage than a typical plan, umbrella policies and supplemental coverage options are available.
Personal automobile policies (PAP) are available to car owners from a considerable number of insurers and are legally required if someone owns or operates a vehicle in most states. Automobile insurance policies can include four coverages: liability, medical expense, uninsured motorist's protection, and coverage for damage to the policy owner's car. A few standard exclusions to automobile coverage are intentional damage, use without permission, vehicles with less than four wheels, driving in a race, etc. When purchasing vehicle insurance, buyers should be wary of the factors that affect the cost of insurance such as the type of automobile, use of the vehicle, the owner's personal characteristics and driving record, location of residence, and qualified discounts. Lastly, in order to keep the cost of insurance low, vehicle owners should window shop before purchasing a policy, consider only high-quality insurers, use discounts, keep a clean driving record, and raise their deductibles.
In conclusion, owning any asset causes the owner to absorb some level of risk, whether systematic or pure; therefore, in order to decrease the likelihood of facing a financial loss because of a catastrophic event, insurance is accessible as a method for mitigating one's downside risk.
Article 1 - 5 Steps to Help Create an Estate Plan
- Work with an experienced estate planning attorney for assistance with wills, living wills, power of attorney, and revocable trusts.
- Assess your assets.'
- Define your goals.
- Determine your tax liability.
- Update your plan.
Article 2 - Planning for Incapacity: 4 Important Documents
- Durable power of attorney - gives the person that you designate the authority to handle your financial affairs
- Healthcare power of attorney - designates a trusted relative or friend to make decisions regarding your medical care if you are incapacitated and unable to make such decisions yourself.
- Living will - provides direction to your physician regarding your wishes as to whether or not you want to be kept artificially alive with medical treatment if there is no reasonable chance that you will recover
- Will - provides the security of knowing that you have left behind a plan for the distribution of your assets
(October 21-27)