The Purpose of Risk Management

There is a great variety of risk in our lives, and mitigating these risks is an intelligent response to achieve financial self-preservation. Personal risk When considering insurance as a means for financial protection, two main issues must be considered and resolved: Your ability to accept the financial risk inherent in insurance policy protection, and Your willingness to weather the volatility that sometimes accompanies insurance policies’ value development There are two main reasons for purchasing insurance policies: To protect your financial well-being To accumulate cash And: a combination of the two Insurance as a source of financial support for dependents Insurance can be an excellent tool for providing financial support to the surviving family members. Funds from insurance policies can be used for the typical household expenses of paying bills, maintaining mortgage payments, purchasing food, clothing and health care, and can also be applied to education, day care, legal fees, or business costs. Insurance to service debt Insurance is also an effective means for providing resources to pay off a mortgage, vehicle loans, credit card debt, and debts such as college or business loans. Death does not terminate the estate’s obligation to pay back these debts, and an insurance policy could be very useful for preserving your survivors’ finances. Insurance for personal uses Insurance policies can also be a great resource during your lifetime. Cash value life insurance policies can potentially accumulate cash you can use for any purpose through a policy loan, or policy termination if circumstances warrant. If you terminate your policy, you would pay taxes on the funds you receive, possibly at a favorable rate. Assessing your...