Managing the Possibility of Loss

There are four basic ways to manage the possibility of loss:

Avoid it: This is when you take measures to eliminate the potential by avoiding the cause of loss. For example, to avoid the potential loss associated with owning a car, you take the bus.

Reduce it: Reducing the potential for loss means you take measures to prevent losses. You could prevent fire and accident hazards by keeping your house and garage clean and neat.

Accept it: This means that you are practicing self-insurance. Some potential losses are too small for much concern, like a $40 watch.

Transfer it: You could also have someone else manage the possibility of risk. This is most commonly done through insurance.

There are a few different types of insurance that you should be aware of. The basics are: disability, health, long-term care, homeowners, auto, and life insurance. The following few segments will look at what these types of insurance cover and how they might be useful to you.

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