Insurance is not the only way to manage risk. In the near future I will be an expert* on risk. In fact, I’m actively working on that goal now. My dissertation in Behavioral Economics and Financial Planning will be based entirely on an individual’s perceptions and measurement of risk. But what is risk? What does it actually mean? And what are the ways we can manage risk? Can we manage risk without insurance?
Risk management can become a dirty word in financial circles. Although planning for and understanding risk is fundamentally necessary in all aspects of life, many individual’s interaction with sellers of insurance and risk management products are less than savory. Insurance, and especially life insurance, is seen as an entry point into the risk management industry and fraught with many inherent conflicts of interest. The underlying assumption for many individuals is that risk is managed with insurance. Sure, insurance plays an important role, but risk management is much more than simply insurance.
Risk is a broad subject. It can be thought about in terms of physical risk (safety, war, etc), financial risk, business risk, health risk, or even environmental risk. For the scope of this article, I’ll focus on personal risk, which we have some capacity to control. Continue reading Risk Management (Without Insurance)