Solutions on Financial Planning

Running head: QUESTIONS 0
FINANCIAL PLANNING
MARCH 12, 2020
STUDENT DETAILS:

QUESTIONS 1
Answer 1:
The insurance renders security from the exposure to probabilities as well as hazard of
loss. The risk can be speculative risk or pure risk. There is great difference between pure risk and
speculative risk. The pure risk only includes the possibilities of loss. It can say that the pure risks
are pure in the sense that they do not combine loss along with profit. The examples of pure risk
are premature death as well as fire in house. On the other hand, the speculative risk includes both
loss as well as gain. The example of speculative risk is investment in stock market. Moreover,
the speculative risk also involves the possibility of gain as well even in absence of loss. The pure
risk is insurable. Alternatively, the speculative risk is not insurable (cardon, 2018).
Answer 2:
Steps to effective insurance planning –
Step 1: identification of risk – the first step is to identify risk. It will be required to conduct
detailed examination of the categories of risks the people are facing in the field of insurance
security.
Step 2: measurement of risk – the second step of insurance planning is to measure risk that
actually taking place.
Step 3: methods of managing risk – the next step of insurance planning is to find proper as well
as correct method to manage the risks.
Step 4: Risk administration - The last step of the insurance planning procedure is to apply
appropriate amount as well as different types of the essential insurance coverage. It is essential to