COMMERCE 4FL3 Lecture : Chapter 8.docx

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 4FL3
• Professor: Tony Belsito

Document Summary

Protect you and your family from catastrophic losses caused by the. Loss or damage of important assets such as your car or your home (home and auto insurance) Loss of your ability to earn income (short and long-term disability) Most individuals and families must consider obtaining a wide-range of insurance products to manage household risk. Reimburses for damage or destruction to existing assets. Replaces income lost due to premature death. Covers medical costs from illness or accident. Risk is defined as uncertainty with respect to economic loss. Risk can be dealt with in the following ways: Insurance planning is used to reduce the risk that losses will cause financial devastation. Not participating in activities that have the risk of loss. Example not driving to avoid the risk of an auto accident. Risk avoidance is not always practical or possible! Prevention reduces the chance that a loss will occur. Example: driving within the speed limit reduces the likelihood of an accident.