Risk Management Basics
Everyone has a different level of risk and before you can start to manage your risks you need to identify them. For example, you may live in area where theft is common, or you may live in an area that is prone to flooding.
Before buying insurance, it is important to identify risks and determine how you can reduce the possibility of them occurring. You are then able to put protective measures to reduce the possibility of the risk occurring. For example, you may install security cameras, floodlights and an alarm system in your house to ward off thieves. Insurance will then come in as a way to reduce the impact, especially financially, if the event does occur.
Insurance is an important component of risk management, but it’s not the only one.
It is a condition in most insurance policies that the policyholder has taken all reasonable precautions to manage any risk to their property, and that they have declared any potential risks to the insurer at the time they are applying to take out an insurance policy.