Insurance

The Concept of Risk

Do You Feel Lucky Today?

We all face risks each day - the possibility of injury, illness, death, or property destruction. Although you can never eliminate risk, having insurance shifts part of your financial risk to a larger entity (your insurance company) that's better equipped to manage this risk. In return for your payment of premiums, your insurance company agrees to pay you (and/or others) a certain amount of money for a specified loss. This loss may or may not occur, so both sides gamble. Still, the peace of mind from insurance may be well worth the cost.

Mitigating Risk

Consider the possible losses associated with each risk you've identified. For example, assume you have a spouse, two minor children, a mortgage, and various debts and expenses. If you die within the next few years, how much money will your spouse need to pay off the debts, meet expenses, and perhaps even send the children to college? What if your 68-year-old spouse (or parent) suddenly suffers a stroke and requires around-the-clock care in a nursing home? How will you pay for it? Insurance coverage can protect you, your business, and/or your loved ones from the financial loss associated with risks like these. There are many different types of insurance to consider. These include life, medical, disability, auto, and homeowners, to name just a few. Most types of insurance are optional, but some like auto insurance may be required by your state or lender. Even if a certain amount of insurance coverage is required, though, you may want to purchase additional coverage to protect your assets. And if you have an employer that provides you with one or more forms of insurance coverage, you may want to supplement this coverage with an individual policy. Explore your insurance options, and try to quantify your potential losses. But because an insurance-needs analysis can be pretty complicated, it may be best to sit down with an insurance professional to figure out what types of insurance policies you should buy and how much coverage you actually need.