Turki Alduhami

ID:1093166

FIN 430 H.W

Question 2

A. If Swift Corporation actual losses are less than the loss allowance in the insurers premium they would save money, furthermore there might be sizable expense savings, loss prevention is encouraged, Cash flow may increase, since the funds held by the insurer could be used by the firm. The disadvantages: The losses retained by the firm may be greater than the loss allowance in the insurance premium. In the firm loss experience there might me great volatility. Expenses may be higher. Contributions to a funded reserve under a retention program are not usually income-tax deductible. B. The following factors should be considered in the decision to retain partially the collision loss exposure: Dollar amount of losses the firm will retain Companys past loss experience Tax aspects. Average frequency and severity of losses Added costs of retention Predictability of losses Maximum possible loss and maximum probable loss C. Losses can be paid out of current net income, borrowed funds, payment from a captive insurer if a captive insurer has been established then losses in excess of the retention levels can be paid by commercial insurance. D. The company could avoid hiring poor drivers by implementing Risk Control it is the measurement in reduction of the frequency and severity of losses

Turki Alduhami

ID:1093166

FIN 430 H.W

Question 5 A. A personal risk management program has the following steps. Identify loss exposures Analyze the loss exposures Select appropriate techniques for handling loss exposures Implement and review the program periodically B. Major personal loss exposures include the following: Premature death of Chris or Karen Loss of financial support to surviving family members Catastrophic medical bills Total disability of Chris or Karen Major property loss exposures include the following: Destruction or theft of household personal property Destruction or theft of cars Theft of laptop and computer Major liability loss exposures include the following: 1. Legal liability arising out of the operation of a family car by family members 2. Legal liability arising out of the use of a rental car by Karen when she is traveling 3. Legal liability arising out of other activities of family members that can result in bodily injury or property damage to others C. Chris and Karen should obtain adequate life insurance and disability income insurance. Practicing healthy life style habits could also use loss control. Homeowners policy would cover the physical damage and theft of household property. However, collision and comprehensive auto insurance would cover the possible physical damage or theft of a family car. In addition, retention could also be used by having a deductible for collision and comprehensive losses.. The legal liability loss exposures can be handled by a homeowners policy, which provides personal liability insurance. Auto legal liability insurance could insure the legal liability happening out of the careless operation of a family car by the family .