How can we manage risk? Risk is typically managed in three ways: avoid, retain and transfer.
- Avoid: If the risk of loss is too high and can be avoided, you steer clear of it altogether.
- Retain: This is where you hold onto the risk and are able, or willing to, absorb it yourself. As an example, the financial burden of losing your TV remote is low so you don’t typically purchase insurance for it individually. Insurance does have an aspect of retention to it as well, this is commonly referred to as your “deductible” or “self-insured retention”.
- Transfer: This is where insurance comes in! This is where the risk is too high to retain, but you can’t avoid it. In this case, you’d look to transfer the risk to someone or something else who can shoulder the burden. For example, the financial burden of losing your house is high. That is why you purchase home insurance from a company that contractually agrees to insure your house up to a certain value if damaged by a covered cause of loss.
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This article was written by Joshua Palmer
Josh is a licensed insurance agent with the Mayflower Wollam Insurance Group.
He is a graduate of Mineral Ridge High School, Class of 2008, and attended the United States Air Force Academy, Class of 2012, where he earned a Bachelor of Science in Meteorology.
Josh brings a unique background into the agency and focuses on a mixture of personal, commercial, farm and life insurance. His office is located in our Cortland location.