Risk too big is passed to a risk bearer
Risk, according to the Webster’s Dictionary is defined as the following.
1: the possibility of loss or injury
2: someone or something that creates or suggests a hazard
3: the chance of loss or the perils to the subject matter of an insurance contract ; the degree of probability of such loss
4: the chance that an investment (as a stock or commodity) will lose value
When evaluating risk in your life a simple formula can be used to determine how to manage it.
Risk is the exposure to loss
Risk too big or too important to absorb
Is passed to a risk bearer
A risk bearer is an insurance company.
We all have things in life that need protection from loss. These can vary from an automobile to a home to a retirement account. Insurance companies are expressly designed to underwrite and cushion the damage caused by a loss.
If you own a home you protect yourself in the event of a fire. The same is true in protecting ourselves against health costs in the event of a major illness or accident. We insure our life with life insurance to make certain the mortgage is paid and our children are educated.
Why not insure our retirement funds? Why expose our long term financial security to unnecessary losses? Why gamble with your financial future?
How do we insure our retirement against losses? We do so by allowing an insurance company to hold and manage a portion of our funds. Insurance companies use annuity products as the vehicles to manage and maintain these important funds. Annuities are safe, risk-free and are guaranteed. Annuities also provide for contractual features to customize options for almost any situation.
Risk may be a four letter word but insuring the risk is an easy and intelligent choice.