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
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.

Death
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

Evaluating Disability and Health Risks

You May Also Like

Related Articles
  1. Trading Strategies

    Adjust Market Strategies To Elevated ...

  2. Fundamental Analysis

    How to Create a Personal Risk Management ...

  3. Investing Basics

    Want to Beat the Market? Take on Some ...

  4. Trading Strategies

    Three Types Of Profit Protection Stops

  5. Professionals

    Worried About Stocks? Try on Convertibles

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!