Risk Management and Insurance

As people age, the chances increase that some conditions (e.g., disability) or events (e.g., retirement, loss of spouse) may alter their financial status. Risk management is a field that seeks to reduce the economic costs that would otherwise be associated with those conditions and events. These costs may be reduced both by reducing the probability or severity of the event (e.g., adding safety railings) and by reducing the economic losses should the event occur (e.g., through insurance). For some events there are good insurance products on the market, and for others there are not. Several components of the total retirement package (pensions, retiree health plans, long-term care policies, and personal care provided for those who need special assistance) may help in the management of post-retirement risks. Individual risks are discussed in more detail in other entries in this encyclopedia; in this section general risks and insurance considerations that are important for the management of these risks will be examined.