In the context of insurance, risk is typically viewed as the potential for loss.
Risk is present in everyday life.
Every action you take involves a potential risk, which may result in a loss. Hence, we should try to manage risk as best as we can.
When it comes to risk management, there are 3 important rules you should follow:
1. Don’t Risk More Than You Can Afford to Lose
If a potential loss has dire consequences, you should not retain the risk.
For example, if you own an expensive property, it would be wise to transfer the risk of fire to an insurance company by purchasing fire insurance to cover your property.
If you choose to save a little money by not purchasing fire insurance, you will risk of incurring heavy financial loss should a fire occur on your property. That would be penny wise, pound foolish.
2. Consider the Probability
There are situations where buying insurance may not be viable. This is because the insurance premiums may be too high to justify the coverage.
In such cases, it may be more economically viable to find ways to reduce the probability of the loss occurring (eg. by taking better safety or security precautions to prevent accidents or theft from happening).
3. Don’t Risk a Lot for a Little
If the risk can result in huge financial losses, but the cost of implementing the risk management method is relatively low, then the risk management method should be effected.
No One Can Predict the Future
No one has a crystal ball to predict the future. Therefore, it is necessary for us to manage risk and protect ourselves from unexpected financial losses.
One of the ways to manage risk is through insurance. If you need advice on insurance and risk management, do contact our FLA Organization Financial Advisors for in-depth consultation today.
To support the fight against COVID 19, our Advisors provide Non-Face-to-Face Advisory too. WhatsApp or Video call our Financial Advisors from the comfort of your home. Get in touch with your trusted FLA Organization Financial Advisors today.
