Personal Risk Management: The Importance Of Personal Risk Management

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Introduction

Personal risk management is about being aware of the risks in my home and in my life, and then prepare myself how to manage those risks. Insurance plays a big part in risk management. A lot of people don’t like to pay insurance premiums, but when an accident occurs and the insurance pays them for a covered expense, they thank God they had it.
Importance of risk management
By recognizing and managing risk, I save myself and my family from a possible financial failure. A risk management will allow me to live a life free of worrying about how to handle a sudden loss.
Types of risk
Property and casualty risks include my car and other vehicles, home, furniture, electronics, jewelry, cameras, etc. I have to protect these belongings …show more content…

At the same time, the premiums should be an amount I can comfortably afford in my budget. First I should decide what I need to insure, how much to insure it for, and how much I am able and willing to pay in deductibles and premiums.
I should consider that my family’s needs for insurance will change over time. For example, I will definitely need more life insurance when my children are young; I have to take into account that I will need long-term care insurance as I am close to retiring although I can purchase it for less at a younger age; I may not need as much personal liability and business insurance when the kids get older and when I sell my business.
There are multiple ways I can use to reduce my premiums such as installing a home security alarm which may save on my homeowner’s insurance. Also by increasing my deductibles, my premiums will be lower. Some risk might be acceptable. Risk budgeting is about considering what I lose if the worst happens and see if I could live with the loss. Health care and long-term care costs are increasing at an alarming pace, people are living longer, and many older Americans have seen their retirement savings decline in recent down markets. A professional can help me evaluate my health care risks and determine how to plan for …show more content…

I currently only have the coverage required by state of Michigan due to financial reasons. Other than that I have an old car that is not worth the collision, comprehensive and endorsement/riders insurance premiums.
Property insurance
As there are different home styles, insurers offer different kinds of home insurance coverages.
Since I have a single-family house, I found that the most appropriate policy is the HO-3. This policy insures all major perils, except flood, earthquake, war, and nuclear accident.
A house is the most important property a person can own, therefore a 100% replacement cost coverage is a must have. Insurers generally cover the home content between 50 to 75% of the home’s value. The most appropriate action is to make a list of home’s contents and estimate exactly the coverage needed.
Picking deductible amount could be tricky. Although as I raise my deductible I get lower premiums, I should consider how much I can afford to pay before the insurance kicks in.
One last thing to consider is coverages that don’t cost lots of money but may break my budget if it happens such as sewer back up coverage. This might cost me only $5 a month, but if the sewer backs up as it did last summer it may cause to pay a fortune to fix the damages.
Life

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