INSTRUCTIONS:

Read your case study carefully. For your client(s) develop a risk management plan that addresses all the descriptors of their present life situation, keeping in mind that the cases are by no means exhaustive in the information provided. Obviously, the clients are not in front of you, and you are unable to ask follow-up questions, so if you need to make assumptions be clear about what those assumptions are and why they are relevant. There are no wrong answers; some are just better than others. Try to restrict yourself to the risk management techniques that we have studied this semester.

METHOD:

Remember that risk management includes personal risks, property risks, liability risks and professional risks. Refer to the personal risk management process (chapter 3) when identifying the loss exposures of your client(s). I will guide your discussion with questions to make sure you approach your case in an organized and methodical manner.

Be clear in your reasoning behind each recommendation. I want to know why you have chosen each risk management tool and why it is the best choice for your client(s). Please be professional in your answers and present them with no spelling errors, no long hand submissions, no bullet points that lack explanation, although a bullet point format is acceptable). Defend your choices.

Hint always begin with pointing out where the client has made some good risk management decisions. The last thing they want to hear is how at risk they are, or how badly they have managed the risk in their personal lives.

1. What are the steps in a personal risk management process? (4 points)

2. Identify the loss exposures faced by your client (be sure to include personal loss, property loss, and liability loss exposures). (5 points)

3. Analyze these loss exposures with reference to the economic cost (general terms, not exact numbers, perhaps using descriptors like small, predictable, large, unlimited, catastrophic etc.) (5 points)

4. Match the risk with an appropriate risk management technique. Remember that not all risk is best managed with insurance and some risk can be managed with a combination of more than one technique. Remember the main techniques for treating loss exposures: avoidance, risk control, retention, noninsurance transfer, and insurance. Refer to exhibit 3.1 in chapter 3 for a detailed list of all techniques.(10 points)

5. Finally, defend your choices in number 4 giving a compelling argument why each risk management technique(s) that you have chosen is(are) the best one(s). (5 points)

Betty and Frank are both 70 years old and retired. They have 2 children who are now out of the house and completely self-sufficient. One of their grandchildren has a physical disability and Betty and Frank are quite active fundraising for research into the childs condition. It is a cause very important to them and whenever they have charitable donations to give, it goes to the research society.

Both Betty and Frank have considerable IRA assets that they have not yet accessed. They are invested in a variety of equity mutual funds for their IRAs and the funds have grown significantly but are still sitting in the same funds that they chose 25 years ago. Betty and Frank have found that they have enough to live on with the pension income Frank has from his job as a police officer. Both Betty and Frank have life insurance term policies ($250,000 face value) that will expire in 2 years. Frank drives a 2004 high mileage Honda Accord and Betty drives a 2017 Volvo. Both Betty and Frank are on Medicare, so their health insurance needs are taken care of. Frank and Betty live in a small patio home that is fully paid for, walking distance from a busy and vibrant downtown in the Midwest. There have been numerous break-ins to homes in their neighborhood and Frank is wondering what he can do to protect his home and possibly lower his homeowners premium especially since it keeps rising considering the neighborhood risks.

Frank is on the board of a boys home and works to counsel young boys who have been in trouble with the law and have been kicked out of their family home. He makes decisions regarding the staffing of the home and the boys that are permitted residency.

Betty had heard that IRA funds must be withdrawn or else they will suffer a large tax penalty and she looks to you for confirmation and explanation. She is confused and would just like to leave the funds fully invested where they are since they do not need the money yet.

Both Frank and Betty are happy to let their insurance policies expire. They dont see a reason for them since they are both in good health and have enough to live on. They would like to use the money they save from not paying a monthly premium to take a cruise next winter