Analysis and Evaluation of Risk Exposure - Introduction to the Evaluation of Risk Exposure
When individuals consider risk management they must look at the risks associated with four crucial areas including: personal, property, liability, and business. Each of the four areas has special risks associated with it, and individuals should evaluate those risks and then determine a plan on how to cover, transfer, or eliminate those risks.
Personal risks are those risks that we all face on a daily basis in the course of our everyday life- they include the perils of death, disability, bad health, unemployment, and Superannuation. Most personal risks center on the ability to earn an income and provide for your family.
When we consider the consequences of uncovered personal risks, we think about protecting these areas of importance by entering into insurance contracts for life, health, disability, and income for life.
None of us like to consider death, but as the old clique goes... "There are only two things guaranteed in life...that's death and taxes". So, in order to protect the ones we love, cover our debts, pay for funeral expenses, send your children to college, or whatever the reason- many individuals need to protect their income stream in the event of their untimely death and life insurance is a way of doing that.
An individual faces three mutually exclusive risks centering around the uncertainty of death, they include:
1) Superannuation- outliving your income and assets,
2) Premature Death- dying when others remain dependent on your income,
3) Protecting your Estate- paying for taxes in the event of your death