People are at risk every day, yet many do not take the time to evaluate whether or not they have the appropriate insurance coverage.  Mortality is a fact and unless you want to leave your family in a financially devastating situation, you should recognize the need for life insurance and the impact of inadequate coverage.

Once you evaluate the impact (monetary cost) of premature death, disability, or incapacity, you have the option to deal with the inadequacy in three ways:

1. Risk Retention- When you decide to retain the risk, you are in effect choosing to absorb all potential losses personally (as a family) if they occur.  This option is only suitable if you can easily afford the losses if they occurred tomorrow or any day in the future. 

People who are unable to retain the risk, but consciously or unconsciously choose risk retention may be facing an enormous lifestyle change possibly forcing the family members to sell their home, face bankruptcy or the inability to provide for their children’s college education.

2. Risk Reduction- Certain steps can be taken to help reduce the chance of loss.  For example, wearing a seat belt in your car, don’t speed, don’t drink and drive, don’t smoke, maintain a healthy lifestyle.  These steps are an attempt to reduce the risk by trying to prevent the loss or the chance that the loss will occur.  Unfortunately, there is no possible way to completely eliminate the potential loss from death.

3. Risk Transfer- A person can transfer the risk to a third party (insurance company) by purchasing an appropriate amount of insurance coverage.  In exchange for a specified minimum amount, the risk is essentially transferred to the insurance company and they become responsible for the losses when they occur.  Transferring the risk to an insurance company is typically the most cost effective and efficient way for an individual/family to deal with death, disability or incapacity.