Module: Personal Finance
Lecture 9 – Insurance
Introduction
Life assurance and income protection are important elements of financial
planning
Some insurance is a legal requirement
Some insurance policies are a very good idea – it’s something to fall back on
Some insurance policies are not good value for money
It’s a necessary evil in some areas – it’s like a tax
Examples: car insurance, building insurance
Insurance
A protection against possible loss
You are ensuring yourself against what can happen
Key Insurance Terms
Risks exposure to something that could potentially be dangerous; risks
does not necessarily mean it’s a negative thing as you can take calculated
risks; risks can sometimes further you; uncertainty and lack of predictability.
Peril cause of a possible loss i.e. fire
Hazard what could make the situation risky; increase the likelihood of loss
through some peril
Insurance companies will consider the above three
Types of Risks
Pure Risks = accidental and unintentional risks for which the nature and financial
cost of the loss can be predicted e.g. personal risk
Speculative Risks = carries a chance of either gain or loss e.g. gambling, start a
small business
Risk Management Methods T.A.R.A or 4Ts
Example: Car Ownership
Lecture 9 – Insurance
Introduction
Life assurance and income protection are important elements of financial
planning
Some insurance is a legal requirement
Some insurance policies are a very good idea – it’s something to fall back on
Some insurance policies are not good value for money
It’s a necessary evil in some areas – it’s like a tax
Examples: car insurance, building insurance
Insurance
A protection against possible loss
You are ensuring yourself against what can happen
Key Insurance Terms
Risks exposure to something that could potentially be dangerous; risks
does not necessarily mean it’s a negative thing as you can take calculated
risks; risks can sometimes further you; uncertainty and lack of predictability.
Peril cause of a possible loss i.e. fire
Hazard what could make the situation risky; increase the likelihood of loss
through some peril
Insurance companies will consider the above three
Types of Risks
Pure Risks = accidental and unintentional risks for which the nature and financial
cost of the loss can be predicted e.g. personal risk
Speculative Risks = carries a chance of either gain or loss e.g. gambling, start a
small business
Risk Management Methods T.A.R.A or 4Ts
Example: Car Ownership
