Managing Risk with Insurance..........................................................

Lecture 8

R

isk is the possibility that something valuable we own could suddenly
EHFRPHZRUWKPXFKOHVV2XUPRVWYDOXDEOHDVVHWLVRXUVHOYHVDQG
RXUDELOLW\WRHDUQLQFRPH,IZHORVHRXUDELOLW\WRHDUQLQFRPH
ZH¶YHVXIIHUHGDGHYDVWDWLQJORVV2WKHUYDOXDEOHDVVHWVLQFOXGHRXUKRPH
VDYLQJVFDUDQGRWKHUDVVRUWHGWKLQJVOLNHERDWVDUWRUHYHQJROG$OORI
WKHVHWKLQJVRIYDOXHFDQEHJRQHLIVRPHWKLQJEDGKDSSHQV,QWKLVOHFWXUH
\RXZLOOOHDUQDERXWLQVXUDQFHDQGULVNPDQDJHPHQW

Insurance
% 7KH ¿UVW OHVVRQ \RX QHHG WR OHDUQ DERXW LQVXUDQFH LQYROYHV
DFFHSWLQJWKHSRVVLELOLW\RIEDGHYHQWVRUSHULOV$FWXDULHVHVWLPDWH
KRZOLNHO\\RXDUHWRH[SHULHQFHDQ\RIWKHVHSHULOV7KH\DVN\RX
TXHVWLRQVDQGWKHQGHWHUPLQHWKHSUREDELOLW\WKDW\RX¶OOH[SHULHQFH
DORVV6PRNHUVDUHPRUHOLNHO\WRGLHHDUO\DQGDWHHQDJHPDOHLV
PRVWOLNHO\WRJHWLQWRDFDUDFFLGHQW<RXULQVXUDQFHSUHPLXPZLOO
EHEDVHGRQWKHVHW\SHVRISUREDELOLWLHV

% 0RVWRIXVWHQGWRWKLQNWKDWEDGVWXIIZRQ¶WKDSSHQWRXV:H

EHFRPH RYHUFRQ¿GHQW RI RXU YXOQHUDELOLW\ WR ULVNV %XW WKDW¶V

QRWWKHZD\WKHZRUOGZRUNV6WDWLVWLFLDQVNQRZWKDWSHULOVRFFXU

UHJXODUO\DQGDUHUDQGRPWKHZRUOGLVJRYHUQHGE\UDQGRPQHVV

DQGZHDOOQHHGWRDFFHSWWKDW

% :HDOVRWHQGWRRYHUHVWLPDWHULVNVWKDWPD\KDYHUHFHQWO\RFFXUUHG

7KLVVRFDOOHGDYDLODELOLW\ELDVPHDQVWKDWLIZH¶YHMXVWH[SHULHQFHG

DQHDUWKTXDNHRUVHHQDGLVDVWHURQWKHQHZVZH¶UHPXFKPRUH

OLNHO\WRWKLQNWKDWZH¶UHYXOQHUDEOH%XWWKHWUXWKLVWKDWPDQ\RI

WKHVHHYHQWVDUHFRPSOHWHO\UDQGRPDQGZH¶UHQRPRUHOLNHO\WR

experience a loss after a recent disaster than we were before the

GLVDVWHURFFXUUHG