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Insurance Planning
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Insurance is an important component of any financial plan. There are many types of insurance and all play a key role. However, all types of insurance have one thing in common, insurance is designed to protect against a particular risk.
There are five ways to deal with risk.
With insurance, we transfer the risk to another party. That party bears the risk that you are protecting yourself against. This risk may be death, disability, sickness or an accident. However, the party assuming the risk does not accept the risk without compensation. As a result, premiums are charged. The party assuming the risk receives premiums from a large group and is able to provide coverage to the whole group because the odds are that not everyone in the group will suffer the particular risk.
- Avoid the risk. - Don't fly.
- Retain the risk. - Co-payments.
- Transfer the risk. - Insurance.
- Share the risk. - Partnership.
- Reduce the risk. - Safety Improvements.
Insurance is important to any personal finance decision. Many events can wipe out assets which have been accumulated over a lifetime. Medical expenses, automobile accidents, natural disasters and legal liability suits are instances that can require a significant amount of resources. Individuals typically do not want to accept the risk that these events may not occur nor are they willing to self-insure against these risks. Therefore, we seek insurance and insurers are willing to provide coverage.
What types of insurance should an individual consider? Oour discussion will focus on the following types which are common to a personal financial plan. Click on a topic for a further discussion.
- Life Insurance
- Disability Insurance
- Health Insurance
- Homeowners Insurance
- Liability Insurance
- Automobile Insurance
- OASDHI