Insurance and Risk Planning, Techniques Available to Michael and Marry - Case Study Example

Insurance and Risk Planning (Student’s Name) (Institution) Date Introduction It is important to manage risk properly. This is because it is able to reduce the loss which the injured party is likely to pay in the case of a loss (Pear, 2012). In the case of Michael and Marry, it is essential to mitigate their risk by taking different insurance policies to ensure that there is a reduction in risk exposure. They are also required to take appropriate actions such as risk control and risk avoidance so that they can mitigate property, personal and liability loss. Part A 1. Potential losses Property losses are losses which the company or a person gets as a result of risk. These losses may result from fire, accident, death and sickness (Barrett, 2012). These losses can be compensated when the person takes a policy against risks which causes such losses. These losses arise in the form of property losses, personal losses and liability losses. Property losses These are losses which arise from damage of properties such as building, vehicle, plant and machinery. Physical Damage Michael and Marry can have property losses caused by the damage of their cars and family building. These can result from perils like fire, windstorm and lightning. In the event of damage, the content of the house may also be lost as a result of the same event. The same accident may also cause loss of valuable materials like accounting records and other equipments which are within the premise. Loss of Use It is also possible for Michael and Marry to lose the use of their business for other reasons not damage of property (Pear, 2012). The Government can close the business because of non compliance of health and safety standards. It is also possible for the Government to close the business of Michael and Marry because of unsanitary condition. These are very common uninsurable losses which these couples can face. Criminal Activity Michael and Marry business can also be at risk to crimes. The assets of their business may be stolen by strangers. This may result into great loss of money which requires compensation by insurance company. Personal losses It is also possible for Michael and Marry to get accidental death in a vehicle. This will cause loss of life. This can happen to the couples or to their sons (Barrett, 2012). They can also suffer a qualifying bodily harm from accident or sicknesses. Liability losses Since these couples are doing partnership business. Each partner has an obligation to fulfill under the partnership agreement. It therefore makes each partner to suffer a loss committed by the other partner and this makes all partners to suffer a liability loss. 2. Evaluation of the personal loss exposure In the case of disability under personal loss, the policy period will change. Policy period in the case of disability will be within 25 years only but in the case of death it will be from the date the policy is taken to the date the policy holder dies (Barrett, 2012). The premium paid by Michael for maintenance will not be used by beneficiaries when he is still alive but in the case of death, al the benefits goes to beneficiaries. Disability insurance will only allow the insurance company to maintain Michael but when he dies there will be no compensation for death. 3. Techniques available to Michael and Marry which could be used to manage their risk exposure. Michael and Marry should take risk management very important. This is therefore able to reduce their risk exposure thereby mitigating possible loss. Risk control Risk control is a very important method that Michael and Mary can use to alter their risk exposure. This method is able to avoid risk, reduce the extent of loss and also reduce the level of damage when there is a loss (Antunes, 2015). The only limitation of this method is that it is very expensive to maintain since it require high capital outlay. Risk Avoidance This method can also be used to reduce risk exposure. This can be achieved by proactively avoiding the risk after thorough analysis has been done. When these couples are afraid of a certain risk, it is important to avoid it completely (Hubbard, 2009). This method reduces the extent of damage or loss which is likely to occur when there is a loss. The only problem is that it may reduce the potential benefit that the couples are able to get. Consider risk transference Michael and marry can also transfer their risk elsewhere such as third parties through the use of a good legal process. This method is more cost effective since it gives insurance policy to compensate losses (Hubbard, 2009). This method only requires the couples to pay premiums which may put them into more financial obligations. 4. Insurance products which could be used to manage the couple’s risk exposure. Health insurance The couples can use health insurance policy to manage their risk exposure. This is by taking family and personal life policy (Pear, 2012). This will ensure that when there is qualifying bodily injury, the couples can be compensated for the loss they have suffered. Motor policies – terms and condition This is also a very important product that the couples can use to manage their risk exposure. This will make the couples to reduce the extent of loss when there is a motor accident. It will ensure that the couples get compensation for the loss or damage caused by an accident. Personal life insurance The couples can take personal life insurance to ensure that they are compensated when they are sick or when they are dead. This product is essential is enabling beneficiaries to get compensation for the loss of a loved one thereby reducing risk exposure. 5. Why managing risk exposures effectively is an essential element of their financial strategy Effective management of risk is part of the ways of managing finances. It ensures that there is the use of good risk management which is able to reduce property damage and also to receive compensation after the occurrence of an accident (Barrett, 2012). Risk management also ensure that there is reduction of loss and therefore enable the insured to remain with substantial amount of money which could be used to finance other business strategies. Ways of reducing insurance premium There are ways which couples can use to reduce their insurance premium. These include asking for a discount, keeping their good credit records, requesting higher deductibles and looking for a good insurance company. Seek out other discounts The couples can ask the insurance company to give them a discount which is usually granted to policy holders who have not got any accident (Pear, 2012). They can also receive a discount when they take a defensive driving course. Discount given to policyholders is able to reduce insurance premium to the level which is easy to pay by the couples. Maintain a good credit record The couples can also struggle to keep a reasonable credit history. This information can be used by the insurance company to set out premium (Barrett, 2012). When these couples have good credit record, it will influence the insurer to set a low insurance premium which is easy to pay by the premium. It is therefore determined that people with good credit records seems to have low claims. This is achieved by paying premiums timely and not having more credits than required. Ask for higher deductibles The couples are also able to ask for higher deductions. Deductions are the amount that the insured pay before the policy is taken. The request of higher deduction possibly reduces the premium payable by the insured. Part B 1. Affordable Care Act The belief of the opponent of health care act is very true according to my understanding. The adoption of affordable health care act is able to increase the premiums to other people when the status is not considered (Pear, 2012). This is because it will limit competition of insurance companies since there is payment of the same premium by all insurance companies. Payment of the same premiums by all the insurers will ensure that insurers with low goodwill will not be able to develop goodwill since they cannot reduce their cost to attract new clients. This will able to collapse many young insurance companies (Barrett, 2012). It is also possible to make insured with good health status to pay the same premiums with those people with worse conditions. This creates inequality in insurance thereby causing loss of credibility. It will also make people with minor poor health condition to pay high premiums when their expected insurance claim is less. 2. Why does the Government believe that a penalty is necessary for the new system to work? For this new health system, it is important to use penalty to ensure the new health act is implemented to the later (Barrett, 2012). This will enable different insurance companies to enforce this act. The use of penalty will also ensure that millions of Americans enroll in the insurance to get affordable heath services. Penalty is also meant to increase quality of heath services, reduce cost of getting health services and increase efficiency of health workforce (Pear, 2012). Penalty is also important in removing barriers to access to medical services which some people are able to face. It therefore enables people of all classes to receive medical care without discrimination. Penalty also ensures that there is improvement of efficiency in health care delivery. Conclusion It is important to manage risk or exposure. This will ensure that there is low property damage, reduced loss and efficient management of financial resources. There are different losses which the individual person and their business may face and they include property loss, personal loss and liability loss. In the case of Michael and Marry, the property loss includes property damage resulting from accident lightening and storm. There is also personal loss including loss of life and qualifying bodily injuries. These losses can be mitigated by some methods which include risk control, risk avoidance and risk transfer. These methods will ensure that the insured face minimum risks which eventually reduce the extent of loss when the risk occur. Bibliography Antunes, V (2015). A Production Model for Construction: A Theoretical Framework. Buildings 5 (1): 209–228. Barrett, M. (2012). "Supreme Court Supports Obamacare, Bolsters Obama". BloombergBusinessweek Hubbard, D (2009). The Failure of Risk Management: Why It's Broken and How to Fix It. John Wiley & Sons. p. 46. Pear, R (2012). Health Law Critics Prepare to Battle Over Insurance Exchange Subsidies". New York Times Read More