Every one of us faces a host of risks every day. Driving a car, eating in a restaurant, crossing a busy street, owning property, and sometimes just breathing constitute acts of faith that can carry significant risk. When adverse events might cause losses that can be quantified in dollars, we can anticipate them and manage them to mitigate the consequences.
A clumsy visitor trips on the rug in your front hall, falls, and considers retiring on the proceeds of this misadventure. Or, your dog takes a tasty bite of your neighbor with the predictable ill effects: to the neighbor, not the dog (we hope). Or, you fall down stairs and are unable to work for a year. Avoid sleepless nights and evade these and other potential pitfalls by managing your risks.
Managing risk can be done in several ways. Once you've identified a risk, you can elect to:
In most cases, risks that you can't readily handle or predict are best transferred to a reliable insurance carrier rather than retained by you. You're no doubt already familiar with the typical personal and/or commercial lines of insurance such as homeowner, personal auto, life, disability, health and business owner's coverage. These lines can protect you from varying degrees of risk depending on the likelihood or probability of an adverse occurrence. Probability computations are the stock in trade of insurance underwriters. Their ability to reckon the chance of perils and hazards will set the market price for your insurance coverage.
Insurance comes in all sorts of flavors. In addition to private insurance (homeowner's, health, liability, malpractice, fire, flood etc.) we also have public insurance (the FDIC, for example), and social insurance (Social Security, Medicare, Unemployment and even Workers' Compensation). Insurance is a stringently regulated industry, largely at the state level. But globalization and a rapidly changing legal environment are presenting challenges to this beneficial industry. Environmental concerns, AIDS and terrorism are just some of the conditions that will influence insurance going forward. And let's not forget insurance frauds. Check this link for information on general kinds of insurance fraud. And see this link for a quick refresher on what health insurance fraud can entail.
This section of our discussion goes over the various risk management tools and techniques available to you in navigating your way through the minefield of life. These tools include: