Sunday, October 11, 2009

Types of pure risk

Pure risk creates great financial insecurity fir individual and society. The major types of pure risk are.

1.    Personal Risks
2.    property Risks
3.    Liability Risks

1.    Personal Risks:

The risks that directly affect an individual are known as personal risks. They involve the possibility of the complete loss are reduction of earned income, extra, expense and the depletion of financial assets. There are four major personal risks.

a.    Risk of premature death: It may create great financial problem to the children and the others depending on the household-head. Premature death is defined as the death of a household head with unfulfilled financial obligations. These obligations can include depends to support, a mortgage to be paid off, or children to educate. They may be financial insecure, if the surviving family members receive an insufficient amount of replacement income from other sources or have insufficient financial assets to replace the lost income. In the economic sense, the death of a child age of ten or not premature. But the decease of father or elder brother is taken as the premature death if the deceased has dependents to support or dies with unsatisfied financial obligations. The premature death of a household head costs the followings results. Loss of human life forever, additional expenses for funeral medical unpaid bills, settlement costs and inheritance taxes, insufficient income for dependent  families IV, cost of emotional grief, loss or role model guidance and counseling .

b.    Risk of insufficient Income after Retirement : If the persons live longer even after retirement they along with the dependents have no to face the old age with insufficient income during retirement. When they retire they loss their earned income, Unless they have sufficient financial assets or other secures if retirement income such as social security or a private pension. They will be exposed tofinancial insecurity after retirement. The substantial reductions in their regular income lead to the reduction of living standard and frustration.

 c.    Risk of Poor Health: Suddenly individuals may have to face the major health problem in the life. Poor health is another important personal risk. The risk of poor health includes both the payment of catastrophic medical bills and the loss of earned income. The costs of major surgery have increased substantially recent years. For example an open heart operation can cost more than 10 lakes, Kidney or heart transplant can cost even much higher. The cost of crippling accident requiring several major operations, plastic surgery and rehabilitation can exceed even the higher than the elated group. IN addition long term care in a nursing home can cost more. Unless these persons have adequate health insurance, private savings become insufficient in most cases. In particular, the inability of some persons to pay catastrophic medical bills is an important cause of personal bankruptcy. 

The loss of earned income is another major souse of financial insecurity if the disability is severe. In case of long term disability, there is substantial loss of earned income: medical bill are incurred, employee benefits may be lost or reduced savings are often depleted and someone must take care of the disabled person. All these are the risks of poor health.

d.    Risks of Unemployment: The financial security if individuals in threatened by the risk of unemployment. Unemployment can result from over-competition; imperfection is new skill development of science and technology, business-cycle downswings, structural changes and diversifications. Because of sharp completion, even international companies are forced to hold down labor cost by reducing the employees. This creates the unemployment in the national as well as international scale. In fact a firm can get rid of financial problem by reducing work force. But employs have to face the financial problem.

2.    Property Risks

All non living things owned by persons are property. Real state land and building, vehicles machines and equipments goods raw materials furniture etc are the common examples of property damaged or lost from numerous causes. Real estate and personal property can be damaged by fire lightening tornadoes, windstorms, earthquakes floods ect. There are two major types of loss associated with the destruction or theft or property.

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