Nate Jones, CPCU, ARM, CLCS, AU
4 Ways to Handle Your Risks
by Nate Jones, CPCU, ARM, CLCS, AU - Wexford Insurance
Everyone who lives on this planet has risks in life. Traditionally, we look at "risk" as an exposure to loss. What normally comes to mind is property we own (house, car, phone). We also have financial risk (stocks, bonds, 401K's) that we hope continue to rise. The list of risks we all face can go on and on. So how do we handle our risk? What are our options?
1. Retain your risk. Retention of your risks basically means you do nothing to mitigate your chance of loss. You acknowledge that the risk exists but it doesn't pose a big enough threat that motivates you to change.
2. Transfer your risk. Transferring your risk is normally executed by purchasing insurance. If you own a home, you have a financial risk of the house burning down and having to pay out of pocket to replace it. You are transferring this risk to an insurance company. Transferring your risks cannot always occur (Securities).
3. Reduce your risk. Reducing your risk means that you are apparent of the risk and are actively putting measures in place that will reduce the likelihood of a loss occurring. An example of this can be putting smart home tracking devices in your house than can monitor water and gas leaks as well as detect fires.
4. Avoid your risk. Avoiding a risk is simply choosing not to participate in the act that creates the risk. An example, if you go skiing, you risk injury. If you choose not to ski, you cannot get injured skiing. Avoiding risks isn't always practical.