Whether a business, industry or an individual, all are subject to many forms and categories of risk each and every day. Everyone also faces the costs or potential costs associated with each risk, if and when the risk becomes an event that actually happens. Unfortunately, many do not give those risks due consideration.

Accidents happen all the time and when an accident happens causing damage or destruction to property or equipment there is a cost to repair or replace the damaged/destroyed property.
Likewise, when an accident takes place causing bodily injury to others, there are costs that are very likely to be faced by the party who caused the accident.

Financing the cost of the accident can be easy if we have sufficient money of our own to pay for the damage or injury or if we are able to borrow the money from a financial institution but, it can be devastating when we do not have sufficient money reserves or borrowing power.
Virtually all business, industry and individuals have an alternative manner in which they can finance the cost of risk.

They can transfer many types of risks through instruments most often referred to as insurance policies (which are contracts of insurance).

Contracts of insurance with insurance companies are legal, binding written agreements that provide a measure of indemnification when an insured accident causing financial loss takes place, and unlike the unknown costs of an accident, the cost of transferring the cost through is known before the accident happens. It is the insurance premium cost.

Financing The Cost of Accidents

What is Risk?

Risk is the uncertainty or the possibility or the chance of an accident happening causing physical damage to property you own or injury to others or damage to property owned by others.

When an accident does take place, the accident most often results in a monetary loss. The magnitude or quantum of the loss is only realized after the extent and details of the accident become known.

Such chance occurrences can expose you or your organization to a financial loss or a series of financial losses of a magnitude and size that could compromise the financial stability of you personally or your company or worse, impede the ability to survive complete financial ruin.

Options for Paying Losses

Financing the cost of accidental losses can be managed through three basic choices;

Funding/paying for the financial cost of the accident from your own resources (your bank account),

Funding/paying for the financial cost of the accident by borrowing money to cover the payment of those costs.

Transferring the risk of the cost of accidents to an outside entity/company, usually an insurance company, in exchange for a known financial loss which is the insurance premium cost.