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Questions and Answers
What is considered a personal risk exposure?
What is considered a personal risk exposure?
- Market fluctuations affecting property value
- Financial loss from investing in stocks
- Legal liabilities from property damage
- Loss of income earning ability due to illness (correct)
Which of the following is a consequence of personal risk exposures?
Which of the following is a consequence of personal risk exposures?
- Increase in property value
- Loss of investment opportunities
- Inability to fund desired education for children (correct)
- Improved credit score
What defines pre-mature death in the context of personal risk exposures?
What defines pre-mature death in the context of personal risk exposures?
- Death after the age of 60
- Death of a retiree with no dependents
- Death due to natural causes in old age
- Death occurring before the accepted retirement age (correct)
Which statement best describes the risk associated with pre-mature death?
Which statement best describes the risk associated with pre-mature death?
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What should be prioritized when analyzing risk exposures?
What should be prioritized when analyzing risk exposures?
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Study Notes
Risk Analysis Overview
- Individuals are exposed to three main types of risks: personal, property, and liability.
- Higher potential financial consequences dictate priority in risk treatment.
Personal Risk Exposures and Life Insurance
- Personal risks directly affect an individual's situation, potentially leading to:
- Loss of income earning ability.
- Increased expenses due to illness or disability.
- Inability to maintain desired retirement lifestyle.
- Inadequate funding for children's education.
- Uncertainty in personal wealth accumulation.
- Difficulty in fulfilling estate distribution wishes.
Dominant Personal Risk Factors
- Premature death is the primary personal risk, defined as death before reaching an accepted retirement age (commonly 55 years).
- The financial implications of premature death include:
- Direct financial impact on dependents.
- Loss of future income potential that could support dependents.
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