Question

1. What are the three types of risk? Give an example for each. 

2. List the four steps in planning for your insurance program. 

3. Outline a personal insurance plan with the following phases: a) Identify personal, financial and property risks; 

b) Set goals you might achieve when obtaining needed insurance coverages; and c) Describe actions you might take to achieve these insurance goals.

Answer 1

1. There are various trypes of risk such as market risk, liquidity risk, business risk, financial risk, investment risk and so on. These risk are categorised in to two categories,

A. Systematic Risk

B. Unsystematic Risk

Systematic risk are intrest rate risk, market risk and purchasing power of inflationary risk. These are are uncontrollable by an organization due to the influence of external factors. These external factors are technological factors, socio cultural factors, demographic factors, political or legal factors.

Unsystematic risk includes business risk, liquidity risk, financial risk, credit risk, and operational risk. These tyoe of risk are controllable by an organization due to the influence of internal factors such as company performance, balance sheet, financial reports.

An organisation can reduce the impact of these risks to a certain extent through risk planning and management and shall try to mitigate the adverse effects of these risks to the organisation.

2. One of the method for managing and planning the risk management is insurance. It must need to develop risk management plan while using insurance

Step 1. Understanding the concern, needs and main objective.

Step 2. Determination of current financial situation.

Step 3, long term insurance plans evaluation and risk mitigation plan.

Step 4. Reviewing financial plan.

3. A. Identify personal, financial or property risk.

1. Income protection

2. Property coverage

3. Loss of employment or disability

4. Liability coverage

B. Goals

1. Creating a follow up plan.

2. Incurance agencies

3. Visualise the health of insurance agency.

C. Actions

1. Reach out to insurance agencies

2. Research online for agencies.

3. Asking for referals.