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Chris and Karen are married and own a three- bedroom home in a large Midwestern city. Their
son, Christian, attends college away from home and lives in a fraternity house. Their daughter,
Kelly, is a senior in high school. Chris is an accountant who works for a local accounting firm.
Karen is a marketing analyst and is often away from home several days at a time. Kelly earns
extra cash by babysitting on a regular basis.
The family's home contains household furniture, personal property, a computer that Chris uses
to prepare business tax returns on weekends, and a laptop computer that Karen uses while
traveling. The Swifts also own three cars. Christian drives a 2004 Ford; Chris drives a 2009
Pontiac for both business and personal use; and Karen drives a 2011 Toyota and a rental car
when she is traveling. Although the Swifts have owned their home for several years, they are
considering moving because of the recent increase in violent crime in their neighborhood.
a. Describe briefly the steps in the personal risk management process.
b. Identify the major pure risks or pure loss exposures to which Chris and Karen are exposed
with respect to each of the following:
1. Personal loss exposures
2. Property loss exposures
3. Liability loss exposures
c. With respect to each of the loss exposures mentioned above, identify an appropriate personal
risk management technique that could be used to treat the exposure.
Solution
a. The Swifts face the risk of any potential attack or damage or theft due to the increase in violent
crime in their locality. They are planning to mitigate or compleyely remove this risk by moving
to another locality. This is a huge step as they are planning to vacate their own house and move
to another house on rent to avoid the risk of any personal loss or damage due to the rising crime.
b. 1 - Personal loss exposure includes loss of life of family members due to murder or attack. The
exposure is the lives of Chris, Karen and Kelly. Christian is not exposed as he lives in a fraternity
house.
2 - Property loss exposure includes loss of property due to potential theft. This exposure includes
the movable properties owned by the Swifts - household furniture, personal property, personal
cars - Pontiac, Toyota
3. Liability loss exposures includes loss of property not owned by the Swifts. They are Chris's
computer (probably given by his employer), Karen's laptop (probably given by her employer),
Pontiac (to the extent it is being used for business purpose) and the rental car used by Karen.
c. To mitigate the personal loss exposure, the Swifts should move to a new locality.
To mitigate the property loss exposure, the Swifts should liquidate the immovable properties.
The movable properties can either be liquidated or can be shifted to the new house where the
Swift's are contemplating to move.
To mitigate the liability loss exposure, the Smiths, while they are living in the crime infested
locality, should return the laptops, computers and cars not belonging to them to their employers
or the renting agency. They can start using them once they shift to their new home in a different
locality.

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  • 1. Chris and Karen are married and own a three- bedroom home in a large Midwestern city. Their son, Christian, attends college away from home and lives in a fraternity house. Their daughter, Kelly, is a senior in high school. Chris is an accountant who works for a local accounting firm. Karen is a marketing analyst and is often away from home several days at a time. Kelly earns extra cash by babysitting on a regular basis. The family's home contains household furniture, personal property, a computer that Chris uses to prepare business tax returns on weekends, and a laptop computer that Karen uses while traveling. The Swifts also own three cars. Christian drives a 2004 Ford; Chris drives a 2009 Pontiac for both business and personal use; and Karen drives a 2011 Toyota and a rental car when she is traveling. Although the Swifts have owned their home for several years, they are considering moving because of the recent increase in violent crime in their neighborhood. a. Describe briefly the steps in the personal risk management process. b. Identify the major pure risks or pure loss exposures to which Chris and Karen are exposed with respect to each of the following: 1. Personal loss exposures 2. Property loss exposures 3. Liability loss exposures c. With respect to each of the loss exposures mentioned above, identify an appropriate personal risk management technique that could be used to treat the exposure. Solution a. The Swifts face the risk of any potential attack or damage or theft due to the increase in violent crime in their locality. They are planning to mitigate or compleyely remove this risk by moving to another locality. This is a huge step as they are planning to vacate their own house and move to another house on rent to avoid the risk of any personal loss or damage due to the rising crime. b. 1 - Personal loss exposure includes loss of life of family members due to murder or attack. The exposure is the lives of Chris, Karen and Kelly. Christian is not exposed as he lives in a fraternity house. 2 - Property loss exposure includes loss of property due to potential theft. This exposure includes the movable properties owned by the Swifts - household furniture, personal property, personal cars - Pontiac, Toyota 3. Liability loss exposures includes loss of property not owned by the Swifts. They are Chris's computer (probably given by his employer), Karen's laptop (probably given by her employer), Pontiac (to the extent it is being used for business purpose) and the rental car used by Karen.
  • 2. c. To mitigate the personal loss exposure, the Swifts should move to a new locality. To mitigate the property loss exposure, the Swifts should liquidate the immovable properties. The movable properties can either be liquidated or can be shifted to the new house where the Swift's are contemplating to move. To mitigate the liability loss exposure, the Smiths, while they are living in the crime infested locality, should return the laptops, computers and cars not belonging to them to their employers or the renting agency. They can start using them once they shift to their new home in a different locality.