Effective Risk Management Strategies for All: Save on Insurance

Risk Management Strategies

What are effective risk management strategies to reduce risk and save on insurance?

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Four ways to reduce risk that work equally well for the head of a household, a small business or a large public company. Proper use of these techniques will also save you money on your personal or business insurance.

Volumes have been written about risk management, but it all comes down to four simple options and the thought you put into implementing them. When faced with risk you can AVOID it, MITIGATE it, RETAIN it, or TRANSFER it.

Avoidance involves electing not to accept the risk.

For example, if you are no longer comfortable with the additional risk you created by buying a trampoline, avoid this risk by giving it away to your sister-in-law.

Mitigation involves taking steps to reduce the likelihood or severity of a loss.

Expanding on the trampoline example above, you have now decided to keep the trampoline. However, you have decided to take a few actions to reduce the chances someone will use it without your permission and do a few things to make it a safer toy.

First, you put a lock on your back gate limiting access to the trampoline (reducing the likelihood of a loss). Then, you spend a few thousand dollars buying padded mats and spreading them around the trampoline (reducing the severity of a loss).

Retention of risk is accepting the chance of a loss.

If you do not insure your car, then you have decided to retain the risk and accept all the consequences of the loss. A more prudent use of retention is the deductible on most property policies.

Transfer of risk takes place through the use of contracts.

A hold harmless agreement is a contract stating that one party will not sue another.

However, the most common form of risk transfer is an insurance policy. Insurance policies are contracts where one party (the insurer) assumes the risks of another (the insured) in return fora 'premium' payment.

A word of caution on risk transfer through and insurance policy.

Virtually all insurance policies have coverage limits (the insurance company's version of Retention and Mitigation) so make sure that you purchase limits that are appropriate to your situation.

An insurance agent who represents more than one insurance company or a professional Risk Manager are in the best position to advise you on what limits are appropriate for your situation.

By using a little common sense and putting thought into which risks and how much risk you are willing to accept you can better protect yourself, your family, or your business from many of the perils that life throws at you.

Properly applied, these techniques can even help you save money on your insurance premiums.

Also in this issue

Published: Thursday, 6th Sep 2007
Author: 49

Life Insurance Articles

Maximize Your Safety Net: Top Tips for Optimizing Income Protection Benefits

Welcome to a pivotal guide dedicated to empowering you with the essentials of income protection insurance in Australia. As we navigate through times of uncertainty, safeguarding your financial wellbeing becomes not just a priority, but a necessity. Income protection insurance stands as one of the key pillars of financial security, ensuring a steady flow of income during periods when you're unable to work due to illness or injury. - read more

Understanding Life Insurance: How to Determine Coverage Amounts

Life insurance is a cornerstone of financial planning, offering peace of mind to you and security for your loved ones. It's a contract between you and an insurance company: in exchange for regular premiums, the insurer agrees to pay a sum of money to designated beneficiaries upon your passing. This vital tool ensures that your family's financial needs can be met during an incredibly difficult time. - read more

Trauma Cover: Calculating Adequate Protection for Life's Unexpected Moments

The financial fabric of our lives consists of both planning and safeguarding against the unforeseen. Trauma cover, a lesser-known but crucial aspect of personal insurance, provides this protection by offering a lump sum payment upon diagnosis of specific serious illnesses or injuries. In the tapestry of financial planning, it acts as a vital safety net, ensuring that unexpected health crises do not lead to monetary distress. - read more

A Millennial's Guide to Life Insurance

For many millennials, navigating the complexities of personal finance and future planning can feel like a bewildering journey. Among these financial responsibilities, life insurance emerges as a paramount consideration. More than just a safety net, life insurance can be the cornerstone of a sound financial strategy, providing peace of mind for both the policyholder and their loved ones. - read more

How Pre-Existing Conditions Influence Life Insurance Premiums

When it comes to life insurance, a pre-existing condition refers to any medical condition or illness that you have been diagnosed with before applying for a life insurance policy. - read more

Insurance News