# Personal risk management project

The family and their risk management Solution a) the principal (P) = \$3, 500 + 50% of \$3, 500 = \$5250 The rate(R) = 8% Time(n) = 20 years
Using
Amount(A) = PRn
= 5, 250(1. 08)20
= \$24, 470. 0
Solution
1 b) Human life value of Sarah Smith = 55% of \$90, 000 and Interest rate is 5%
= \$16, 36765
Solution
1 c) benefit per month = \$814
Benefit for 120 months ( Future Value) = \$814 x 120
= \$97, 680
PV = FV/(1+r)n
Where r = 6% and n = 10
PV = 97680/1. 0320
= \$54, 083. 05
Solution
1 d) Bobs’ should take a policy higher the \$50, 000. considering his income and future inflation the insurance cover should be his average income divided by 8% added to his outstanding mortgages. The amount should be above \$562500 + \$45000.
Sarah Smith should consider another life policy apart from the group policy provide by the employer. This also because of her total income and her net worth. Her cover should be above \$937, 500 + \$ 75000
Bob Smith and his wife should think of a very comprehensive cover for their children, so that apart from , college fee policy put as a life cover should also include health policy.
2 a). The three major mistakes Smith is making are:
This is a policy provides the minimum coverage amount, and so Smiths family is may be treated as a family who takes needless risks, and they might end being charged higher premium for any future policies..
When Bob or any member of the family injure someone else or damage someone else’s property, the law may compel them to pay for the damage or loss. In such a case, their life savings, properties like home, and even their future income are in jeopardy. If someone sues any member of this family, and without enough insurance cover a major judgment could make this faaamiiily bankrupt. (Rebecca)
2 b) The insurer will have no liability and will not have any legal binding to compensate Mr. smith for the stolen vehicle. Collision coverage protects your car against damage caused while you are driving . He requires to have a comprehensive coverage which protects His car from damages that are not related to driving, events such as storm , damage, fires and stealing of a motor vehicle. Meanwhile Smiths must have Liability coverage because it’s a requirement under the law.
2c) A comprehensive coverage and liability coverage, are missing from PAP taken by Mr. Smith. If the vehicle does not have comprehensive coverage, it may not be insured against theft. (G.)
2 d) Bodily Injury liability will cover for injuries caused to a third party. There is also Property Damage liability which covers damage caused to the third partys property.. If Mr. Smiths have liability limits of 25/50/10, it implies that \$25, 000 will cover the bodily injury caused to another single person. \$50, 000 will be the maximum payment for bodily injury per accident. \$10, 000 is for property damage cover. In order to pay any expenses incurred as a result of the accident, \$ 4, 000 in Medicare is taken care of by the \$5, 000 medical payment cover per-person limit in the healthcare policy. However, for Mrs. Smith’s car she will have to provide extra funds to repair her own vehicle.
In Sarah’s Health insurance plans, they have a 75-25 coinsurance . This typically means that after the deductible amount of \$ 500 has been used up, she will be responsible for a set percentage of her medical expenses. She will be required to pay 25% of the hospital bill, while the insurer pays the other 75%. In her case
Total bill = \$34000 – \$500
= \$33500 in the ratio of 3: 1
Sarah pays \$8, 375 and the insurer pays \$25, 125
3 b) Bob should take a cover that would insure him against personal accidents, since he owns a gun and he is a hunter. These activities will increase his risk. The children also needs a health cover, since the medical plan is not sufficient for all of them compared with the total income of the parents.
3 c) Bob Smith should take a policy cover called Scheduled health insurance plans, since he is self-employed and his average income is not enough for any comprehensives health care.
4 a) Storms are very common cause of damage to houses, as when a heavy rainstorm pounds the roof and leads to it leakage, the insurance company will issue a check for the compensation, less the deductible if there is any, together with any extra payments agreed upon.
Smiths’ will get \$ 10, 000 – \$250 = \$ 9, 750, since He has replacement cost policy.
4 b) HO-3 policy is generally offer minimum level of home owners insurance cover. This will not cover any perils like loss of property due to negligence and none adherent to the law deliberate damages to properties and power surge deliberately triggered . Therefore it mean Sarah’s’ stamp may not be adequately covered in this policy in case it is deliberately damaged or mechanically grounded . That also applies to Smith’s gun for hunting. The gun will not be covered if the gun is carelessly used by any member of the family other than Smith and it confiscated by a court order. One of the solutions Mr. Smith may need is the coverage for some of these specific perils to be introduced separately into the policy by endorsement. They may alternatively choose to go for an endorsed HO-3 policy.
4 c) When fire burns down the couch and the matching chair, the insurer will pay the full amount of \$ 4, 400 of the replacement value.
4 d) No, the medical cost does not cover the hospital expenses and the legal suit caused the Mr. smith’s dog Huey bite. The HO-3 policy does not cover medical expenses for people other than members of Mr. Smith’s Family.
4 e) In this case when the thieves stole the boat and the trailer from Mr. Smith’s compound, it is fully covered and the cost will be paid in full of the replacement cost. The a mount is \$ 6, 000
4 f) If David Smith, the son of Bob Smith is convicted of any crime, there will be a claim, since this is included in the HO-3 coverage.
5 a)For Mr. Smith to sign up for Personal Umbrella Policy, Smith will need to have and sustain definite minimum liability limits on his auto insurance policy and homeowners policies. His liability limit must not be less than \$300, 000. So Mr. Smith improve his liability limit from \$250, 000. He currently own a boat 18 feet and 25 horsepower.
5 b) It is a good idea to have umbrella policy alongside underlying insurance policies from the same company because your property will be fully covered. If these other policies pay a certain amount, the umbrella policy will pay any outstanding amount that may be left out in a given ratio.
5 c) Under umbrella policy of \$ 1 million limit, and a liability limit of \$250 000 per occurrence, Smith will be paid \$750, 000 from the umbrella policy. The \$250, 000 will be claimed from the Underlying insurance policy
This legal theory is known as negligent supervision. Liability for negligent supervision is not limited to parents. Guardians, and others with responsibility to take care and are in control of a child is also liable under these circumstances. There is always no dollar limit on this form of liability. An umbrella or homeowners insurance policy may cover lawsuits .
.
Works Cited
G., Willis. Getting homeowners insurance 5 Tips Home Edition: What to do if you have no coverage. 2006.
Rebecca, Mowbray. Contents coverage reforms urged. The Times-Picayune., 2009.