by Mike Jones, President and CEO
Risk: a possibility of loss or injury. (Definition from Merriam-Webster Dictionary).
Life is full of risks. Think about all the things that can go wrong at any time – missing a reminder or alarm for an important meeting, getting in a car accident, losing a customer, falling and hurting yourself, etc. If you think about it too much, you can get very worried and stressed out. However, it is not wise to do the opposite either – which is to ignore the risks of daily life. There is a happy medium to be found that will allow you to live life more comfortably and have peace-of-mind but not be careless about risk.
This happy medium can be accomplished through the act of managing risk. Risk management is the art and science of recognizing risks and then diminishing them as needed. Risk management is not always a large, complex process, nor does it need to be. Think about it. You already manage risk and may not even realize it. Do you use alarms to make sure you get up on time? Do you have insurance for your car and home? What about medical insurance? Life insurance? If you are a salesperson or business owner, do you take measures to keep your customers happy so that they remain your customers? And do you wear a seatbelt when you’re in a car to stay safer in case of an accident? You may even have an alarm system and/or a sprinkler system to protect your home or business. And many people also have a vehicle protection plan to protect their vehicle! These are just some of the examples of how people manage risk every day.
Some people try not to spend too much money on risk management measures, but risk management is generally an important part of good financial planning. Are you wondering how? Let me share a few examples:
- Many types of risk management – like sprinkler systems in case of fire, alarm systems in case of burglary, training programs for employees – often lower the cost of various types of insurance. This is because these things can help lessen risk.
- Having a plan for handling risks that can be expensive to recover from can reduce the severity and length of those losses.
- Being informed about the risks involved with owning something, being involved in a certain activity, investing in a business or stock, etc., can be a good way to manage risk and make or save more money.
- Not managing risk can cause people to worry excessively, which is likely to cause stress and can even distract people from earning more money or wealth.
- Lack of risk management can also cause people to continually respond to the bad effects of small risks, which does not allow them to properly handle bigger problems, which often costs more money.
Risk Management vs. Insurance
Now that you are (hopefully) convinced of the benefits and importance of risk management, let’s talk about the risk management process. It involves finding risks, assessing the risks, and then deciding how to handle those risks. You might be thinking that this sounds like insurance. Not exactly. Although insurance is one of the most well-known and common ways to manage risk, insurance and risk management are not the same. Not every risk can be insured, but almost every risk can be managed.
Insurance is often an important part of risk management, but it is not always the first tool to use and it is certainly not the only tool. As already discussed, risk management can involve many different methods, tools, and activities – such as being informed, implementing safety measures, having a contingency plan, and more. Insurance, on the other hand, is a risk management tool. Insurance is a contract where a person or organization gets financial protection or reimbursement against losses from an insurance company. You can buy many types of insurance: health insurance, life insurance, homeowners’ insurance, car insurance, or even insurance for electronics like a television.
Risk Management and Your Vehicle
What about risk management for your vehicle? You know. That thing you depend on to get you to work, school, and other important activities. You already have some knowledge of the importance of risk management as it relates to your vehicle since you have car insurance. At least, I assume you have it because it is required by law in every state but New Hampshire. But do you have a plan for managing the risk associated with vehicle repairs? That is where an extended vehicle warranty or vehicle protection plan comes in! Have you thought about the fact that once your manufacturer’s warranty has expired, you are responsible for all repair expenses for your vehicle? That’s right. Unless you have an extended vehicle warranty or a vehicle protection plan, you must pay out of pocket for every repair bill you receive.
If your manufacturer’s warranty has expired or will expire soon, please contact autopom! today and let one of our friendly and knowledgeable agents assist you with a quote. We promise to work with you to find you the best plan for your needs at a competitive price. Also licensed to sell mechanical breakdown insurance in California! Call autopom! today for automotive peace-of-mind at (800) 724-8141.