Family Chat

What is risk?

Have you thought about your future financial risks? What are some risks that you need to protect yourself from? How will you do protect yourself and your family?

What are your most valued possessions? What would you pay to protect them?

What Is Risk Management?

Risk management is a process to minimize and control the negative impact of a possible loss, usually financial.

There are several types of insurance available to help you prepare for possible financial loss: auto, health, disability/life and property insurance.

Auto Insurance

Imagine that you have just finished shopping at the local mall. As you are pulling out of your parking space, another car pulls out behind you and your cars collide. You've just been in a fender bender.

Depending on what kind of car you drive, the extent of the damage, and what type of auto insurance you have, the fender bender may cost you between $200 and $2,000 (source: msnbc.com). If your insurance does not cover the cost, how are you going to pay for the damage?

Auto insurance is a legal requirement in most states. Drivers without auto insurance can be fined or arrested.

Visit www.iii.org to find the specific auto insurance coverage required in your state.

Auto insurance costs vary depending on your personal situation. Rates are based on factors such as where you live, the make and model of your car, your driving record, and your age.

Do you know which coverages are included in a basic auto insurance policy?

To list all the auto coverages with which you are familiar, click here for the Auto Insurance Coverage worksheet.

How well did you do?

Click here to view Auto Insurance: Basic Coverage. Compare your answers with this list, then update your list.

What determines the price of your policy?

Go to http://www.iii.org/individuals/auto/b/whatdetermines to find six factors that influence the price of your policy.

Shopping for auto insurance is important because insurers vary greatly. Consider these six things when shopping for auto insurance:

You can lower your insurance rates by choosing a car that is less expensive to insure and by completing a defensive driving class.

Price shouldn't be the only deciding factor. Low prices are important, but having an insurer that is financially stable AND provides prompt customer service is also important.

Auto insurance companies often offer the same coverage at different prices, so get at least three quotes.

The auto insurance deductible is the amount of money that you pay for damages before your insurance company will fulfill a claim. For example, you may have a $200 deductible. This means that if you are in a car accident and your car has $1,100 in damages, you have to pay the first $200, and your insurance company covers most, if not all, of the remaining balance. The higher your deductible, the lower your payments for insurance will be, but the more money you pay up front if you have an accident. Increasing your deductible from $200 to $500 may decrease your payments by as much as 15—30 percent.

If you buy a low-maintenance car, your insurance costs will be much less than if you buy a car that is expensive to repair.

Some insurers offer discounts for qualifications (such as no accidents in three years, antitheft devices, air bags, automatic seatbelts, getting good grades as a student, having more than one car insured with the company).

To learn more about how to save money on your auto insurance policy, go to http://www.iii.org/individuals/auto/b/savemoney and find the factors that influence the price of your policy.

For more information about risk management, visit the Health Insurance, Disability/Life Insurance and Property Insurance sections of this activity.