Transferring Risks With Insurances

Transferring risk refers to shifting the risk in whole or in part from you to another party. The most common form of transfer is the insurance mechanism whereby, in exchange for a predetermined premium payment, an insurance company will assume losses that you would've otherwise had to absorb yourself.

Here's an example: You transfer the risk of fire damage to your home to an insurer for $800 a year. Your home is destroyed by fire. The insurance company pays the entire cost to rebuild, the cost to replace all your destroyed belongings, and even the additional costs you incur to live elsewhere while your new home is being rebuilt.

The other type of transfer (the bad kind) occurs in just about every contract you sign in your daily life. "But I never sign contracts," you're thinking. Really? I bet you do - we all do. In any given year, you likely sign contracts for an apartment lease, a boat rental, a vacation condo, a rental car, a credit card, a real estate purchase, or a home-repair proposal. These are just some examples of the contracts you sign in your daily life. I could give you many more. It's almost impossible to be alive and not sign contracts in today's busy world. In just about every one of these contracts, someone is trying to transfer some kind of risk to you, often without your knowledge. If there's a problem, you're simply out of luck. Courts don't accept failure to read what you've signed as an excuse.

Take a closer look at two types of everyday contracts in which you assume responsibility unknowingly, and the surprises that can be waiting for you.

• Renting a chainsaw from a hardware store: You assume absolute liability for damage to the saw, even if it's not your fault, as well as all liability for injuries to another person (for example, a friend using the saw), even if the injury was caused by a defect in the saw. You also release the store from responsibility for your injuries, even if they're caused by a defect in the saw.
• Wedding reception catering: You assume all liability for injuries to guests, even when they're caused by the negligence of the restaurant (for example, food poisoning). You agree to pay all defense costs of the restaurant in such injury lawsuits and to pay any judgment against the restaurant out of your own pocket.

Can you imagine how upset you'd be if some dear friends at your daughter's wedding reception suffered serious illness or even death from contaminated food, and you were forced to pay to defend the restaurant? Plus, you had to pay all judgments against the restaurant, just because you innocently signed a contract to do so?

Does this scare you? I hope so. Fear is a good thing when it keeps you from hurting yourself. And if you don't start paying attention to the routine contracts of your daily life, you could easily assume a risk that can ruin you financially.

You will surely want to know more about insurance, how to buy the cheap insurance you need. Certainly there are many places online where to get all these. One website I can recommend is cheap-insurances. You can know about: cheap auto insurance, cheap health insurance and many other insurance concepts.