1.Outline the four steps of creating a personal insurance program.
Individuals have a right to pick their personal insurance program. Each person should determine what they need in the insurance program. There are four steps need to create a personal insurance program. First, one must set insurance goals. “Your insurance goals should define what to do to cover the basic risks present your life situation”(Hughes, 2009, p.312). For example, when you purchase a home you should purchase home owner insurance to protect your home; in case there is a fire, water damage, break-ins or thefts. You can live comfortably without worry about losing your home.
The second step in creating an insurance ...view middle of the document...
2.In understanding insurance in general, compare and contrast the distinctions of (a) pure risk and (b) speculative risk.
Pure risk is risk in which there is only a chance of loss; also called insurable risk” (Hughes, 2009, p.310). Pure risk maybe losing your house in a fire because you do not have homeowner insurance. For example, last years in Georgia there was an ice storm that damaged thousands of cars. One of our cars have full coverage insurance while the other one has just liability. The insurance company decided to pay for the damage on the car that has full coverage. However, we took a lost for the car that only has liability. Therefore, if this car is totaled in an accident it is a lost for us. “Pure risk are accidental and unintentional risks for which the nature and financial cost of the loss can be predicted” (Hughes, 2009, p.310). The lost can be predicted because of the coverage on the vehicle. “Pure risk is related to events that are beyond the risk-taker's control and, therefore, a person cannot consciously take on pure risk” (Investopedia).
Speculative risk is” a risk in which there is a chance of either loss or gain”(Hughes, 2009, p.310).When thinking of speculative risk it is like gambling. For instance, people investing in stocks. They have a chance to loss or gain. In the event the stock lose money then the person will lose their money too. People take risks daily. For example, people who gamble may win or lose. People uses thousands of dollars to gamble at the casino. Then they have problems when they lose their money. “By definition, almost all investment activities involve speculative risks, as an investor has no idea whether an investment will be a blazing success or an utter failure” (Investopedia). Before investing in anything you should determine whether or not you can afford to take the risk.
3.Give the various types and subtypes of life insurance policies and briefly explain what each offers.
There are a variety of life insurance policies. Each individual will need to determine which is best and...