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Fundamentals of Risk and Insurance, 11th Edition by Therese M. Vaughan, Emmett J. Vaughan

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CHAPTER OBJECTIVES

When you have finished this chapter, you should be able to

  • Identify the exposures that arise in connection with an individual's income
  • Explain the concept of present value and why it is important in measuring life values
  • Explain the human life value concept
  • Describe how various lifestyles affect the risk of loss from premature death
  • Explain the process of needs analysis
  • Identify the sources of protection that may be available to an individual as protection in the event of premature death
  • Explain how the risk of disability differs from the risk of premature death
  • Explain the relationship between the risk of premature death and longevity risk

We begin our study of specific types of insurance by looking at personal risks and insurance coverages designed to deal with them. As explained in Chapter 1, personal risks relate to the loss of the ability to earn income and include premature death, dependent old age (longevity or “superannuation”), sickness or disability, and unemployment.

We treat these risks first to follow the philosophy of risk management. This entire text is designed to develop concepts that should be used in dealing with risks the individual faces. We noted in Chapter 4 that losses with the greatest potential severity merit first attention. Following this principle, we turn first to the risk with the greatest potential severity for the individual ...

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