How to Handle Risk?

How I Handle Risk?

Risk is defined as the uncertainty concerning the occurrence of loss. The key word in that sentence is “uncertainty”. There isn’t a person on this planet who can predict the future. And to think that one can is naïve and reckless. If we’ve learned anything from our past, it is that unexpected things happen. Those unexpected things can be both positive and negative. Some of the best things in life can come as unexpected surprises. However, on the flip side, some of the worst things that can happen in life are unexpected as well. As I’m writing this paper, I’m watching the news about the recent bombing at the Boston Marathon. The Boston Marathon occurs on Patriot’s Day in Boston every year. It’s citywide celebration and runners travel from all over the world to run in it. As we all heard of the events on Monday April 13th, there wasn’t anyone that wasn’t in complete shock. It’s unbelievable to think about things like this happening. They make no sense. But as they occur more and more often, it only reinforces the need to protect ourselves against the unexpected.

How do we protect ourselves against that which we cannot predict? That is where insurance comes into the equation. Insurance comes in many different forms and is there to protect us in nearly every aspect of our life. It is defined as the pooling of fortuitous losses by transfer of risks to insurers who agree to indemnify the insured for such losses, to provide other pecuniary benefits on their occurrence, or to render services connected with the risk. Pooling is the heart of insurance. Pooling spreads the losses incurred by few over the entire group so that the average loss is substituted for actual loss. Insurance companies use the law of large numbers to help them more accurately predict future losses. The American people work hard every day to earn a living and raise a family. We work too hard to have unexpected events ruin the life we’ve built. Insurance provides that protection.

We face many personal risks in our lives, but the four major risks are premature death, old age, poor health, and unemployment. I am a young, single man who is in his last year of college and working full time. I do not have any dependents, I rent a house with friends, and my car is paid off. For the most part, I am responsible for only taking care of myself. However, I do have debt that will have to be paid off whether I’m dead or alive. When my life comes to an end, I do not want to leave my friends or family with any financial burden. To protect this from happening, I am enrolled in a group term life insurance policy through my employer, Sprint Nextel. There are different options available but the option I have decided on at this time pays up to $50,000 to my beneficiary. As I am currently knocking out my debt snowball as part of Dave Ramsey’s Total Money Makeover, all of my disposable income is being