Benjamin Franklin once said, “In this world nothing is certain but death and taxes.”
A wise insurance man I once knew added, “The rest of life is about personal risk management.“
Insurance is a tool we have to help manage our personal risk and an important part of living a life we can control for ourselves. Between death and taxes is our lifetime and each of us manage our lives the way we decide. In our culture the hope is to build wealth, provide for our children and families, plan for our retirement and leave something behind if there is anything left. Some will do better then others and some will take risks and end up needing more assistance then others. Personal risk management is something we do our whole lives.
So what is “Risk?“
Risk is anything that threatens to harm or destroy our personal property, reputation, freedom, and future. The amount of risk a person faces depends a lot on what they have, what they do and the lifestyle they have today and want to have in the future. Many people have become educated about investments and building financial security for their futures at the same time many people fail to consider the worst possible case scenarios and fail to have a plan in place to recover in case the worst possible loss were to happen to them.
The way a person decides to manage or deal with risks falls into four basic categories:
- Retained or accepted: The part of the risk that a person is willing and able to assume if the worst kind of loss were to occur.
- Insured: The part of the risk that a person is able to have underwritten and insured for a premium.
- Reduced and controlled: The part of the risk that a person is able to reduce and control with certain changes, routine maintenance and other methods.
- Eliminated: The part of the risk that a person is able to remove completely by choice or sale.
When considering the risks you have in life considering the ways to avoid, control and cover the loss in the event the very worst things happened is personal risk management. In the next entry in this series I will Blog about Retained or Accepted Risk.
Related Blogs:
- Personal Risk Management
- Risk Management: Protecting Your Assets.
- What is “Risk?”
- Retained or Accepted Risks
- Controlling and Reducing Risks
- Eliminating Risks
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