Insurance Planning |
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How To Manage Risks?
There are basically 4 types of Risk Management:
1. Risk Avoidance - This is a technique where an individual try not to involve in certain risk situation. For instance, an individual try not to take the accident prone route to his office every day even though this is the shorter way. He chooses an alternative instead.
2. Risk Reduction - This involves actions taken in order to decrease the chance or the consequences of a hazardous event. For example, a footballer wears football helmet, face mask, mouth piece, jaw pads, chin strap, shoulder pads, thigh pads, hip and tailbone pads, knee pads, shock pads, rib pads, receiver gloves and neck roll to reduce the impact of an accident in the field.
3. Risk Retention - This is a method of self-insurance, whereby an individual retains all the risks himself without avoiding or transferring them. A very good example of risk retention happens to old car owners where they normally reluctant to buy a comprehensive car insurance. They would rather absorb the cost of repairing.
4. Risk Transfer - Risk transfer means shifting the risk from a party to another; usually to an organization. Buying insurance is a form of risk transfer. This is the most effective way to manage risks.
What is Insurance Planning?
Insurance planning is to transfer one's risk to an insurer via signing up an insurance contract and paying up an agreed premium sum.
There are two types of insurance:
The General comprises all non-life policies eg. automobile, homeowners, marine cargo, public liability, professional indemnity, product liability, pet insurance, creditor insurance etc.
In Life Planning, our focus is more towards the Life. The Life compensates when there are economic losses incurred to an individual due to, but not limited to, loss of limbs, health or life. Getting coverage is important not because one is going to die, but it is because others are going to live on, especially those who are dependants to the demise.
Why Insurance Planning?
Imagine that you have the most beautiful plans on earth. You have a good career which pays you well. You bought a house on mortgage. You were married to your ideal woman 5 years ago. You have 2 beautiful kids. Your wife resigned a year ago just to take care of them. And so, you are the sole breadwinner. You are saving for your children's education. You are making some money out of your investments. You know they are going to be the support for you and your wife when you retire. You plan to travel the world after your retirement.
Life seems so beautiful to you and you know you can execute them all, one by one, By 20-30 years later, all your plans may have been accomplished. You are the engineer behind all these. You feel proud. And you know, all these are going to happen with one simple condition, that is you can continue to work for as long as the period required. How do you make sure you will not fail? Accidents, disablement, diseases and death; they are all variables. You simply cannot get rid of them. If one of them strikes, your life plans may fail. If you have minor(s), the situation get worse.
Hence, Insurance Planning is the way to get you and your loved ones out of this.
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