Different Type of Risk - Risk Management and Insurance, Principles of Insurance Video Lecture | Principles of Insurance - B Com

okay so in this video I'm going to
introduce the concept of risk management
and specifically so with the three types
of risks known as the predictable risks
okay but before I do that I'll start off
with the brief story about a family okay
I find that stories have always helped
me so hopefully this will help you so
I've got the family here a husband and a
wife who's also a father who's also a
mother and also her dear daughter Susan
and their son Kevin okay so here is
their financial story okay so on the
financial side
I'll put their income on the side now
put the expense on the side so on the
side of income John makes about $3,000 a
month
okay per month and Mary makes exactly
the same she makes $3,000 a month so
total combined income is six thousand
dollars per month okay now like any
other family
they have expenses okay
expenses okay and I'm not gonna list
them all but let's say their monthly
expense is about $5,000 okay
per month this is their expense that's
their Inc therefore the net for this
family at the end of each month they
have a net okay so this is income minus
expense so 6,000 minus 5,000 minus the
5,000 that's their expense okay so this
family is saving about $1,000 per month
okay and now you was an agent you were
gonna come here and you are going to try
to help this family deal with the risks
well what risks you might say so let's
introduce the concept of predictable
risks okay so predictable risks
so these are risks that families are
better off planning against okay so that
in case they happen then they know how
to deal with them or they have a
solution for them so and I'm gonna place
these risks here really briefly one is
the first risk is the risk of death okay
so John might die or Susan or sorry Mary
might die and in that case this income
will be affected so they don't have six
thousand anymore even though their
expenses might be still five thousand
right so let's let's let's take an
example of this okay let's take this as
an example let's say that John this is
hypothetical now okay guys well what
happens to the income okay so their
income now that means is their household
income instead of being six thousand we
have to subtract three thousand okay
because of John dying what that means is
now this family is only left with three
thousand dollar income right now let's
say the expenses are the same okay so
what if the expenses are let's just say
five thousand still okay what does that
mean for the span
well what that would mean is that their
new income 3000 that's only Mira's
income minus the expense of 5,000 per
month you have this family under buy two
thousand dollars every month okay so
this is one risk that this family is
carrying the risk of death if Mary dies
or if John dies this is the outcome
right they won't have enough money to
cover the expenses month to month to
month now there are other risks
associated with death rather other sides
to it other but but this is this is good
enough for now okay
the risk of death now the next risk
we're going to introduce is the risk
which is the color blue here actually
the black is the risk of disability okay
so what do mean by disability now let's
say for this example let's say that Mary
gets disabled at work okay Mary is
disabled okay maybe it's short term
maybe she she was disabled you know for
a year and she couldn't work that year
all right now let's say Mary was getting
government okay
I'm 8 some sort okay let's see she was
the government gave her 50 percent right
so 1500 dollars per month I think well
let's look at their income situation now
so if we look at their income situation
now we have John who's still making
three thousand right plus Mary now
making that fifteen hundred right total
now is $4,500 income okay let's see the
expenses okay remain the same just for
example
okay so expenses what I meant right okay
let's see the expenses are still five
thousand okay know what happens to their
financial situation
well that's minus five hundred dollars
every month that they don't have okay so
that's another risk it's disability what
if Mary gets disabled okay what if John
dies and vice versa now the third type
of risk is called so risk number three
okay is called an old-age risk basically
what this means is is let's say John and
Mary okay are now retired they're happy
and they're retired and let's say the
house is paid off and so forth and the
kids are out however when they are all
there what do we know they might be
unable to work okay and so they might
not have saved enough not enough savings
and that's a risk because what if they
expected to live so I'm just gonna put
here what if they expect it to live
until it's 70 okay but what if now they
are 85 and they don't have enough
savings well that's a risk because they
won't have income and so we will deal
with insurance product and so forth that
will try to address these three risks
the risk of dying the risk of being
disabled and the risk of being old and
not having enough in savings and not
having enough enough or adequate income
to support their lifestyle okay thank
you