Many of us have had exposure to various forms of insurance throughout our lives. But how do you make the initial decision whether insurance is appropriate for you?
Today, I share with you a framework for considering various risks that you face and various ways to deal with those risks.
Terms from today’s show:
Risk: the possibility of loss.
Peril: a cause of loss.
Hazard: an act or condition that increases the likelihood of occurrence of a loss and/or increases the severity of a loss if a peril does occur.
Categories of hazards: physical hazards, moral hazards, attitudinal hazards
Classifications of risk:
-financial versus nonfinancial risks
-particular versus fundamental risks
-static versus dynamic risks
-pure versus speculative risks (pure risks: personal, property, and liability risks)
-insurable versus uninsurable risks
Risk control methods:
Risk transfer methods:
|Expected Frequency||Expected Loss Severity|