I was driving the other day, and the concept of ‘risk’ popped into my head and has stuck with me. Risk plays an active role nearly every day, sometimes more than others, and some risks are bigger than others as well. As an insurance agent, I have looked at risk in a professional light, and I sometimes I occasionally miss the thought of general risk in our life’s decision making.

I have often told my children that life is about making choices. These choices can lead to rewards or consequences. Some of these choices can have very short-term and relatively inconsequential impacts, and others life changing. For example, a kid may take the risk of climbing a large tree for the experience of it all, thinking that the only risk is scratching their legs on the bark, but in actuality, unbeknownst to the kid, the risk to their wellbeing may be much greater than the reward the kid experiences… they just don’t fully grasp that concept yet.

As we get older and wiser, our decisions can have more significant risks associated with their potential reward. Still, we often have the wisdom to weigh appropriate risk vs. potential reward. Some of our life’s risks take a real leap-of-faith type of move with no real safety net, but other types of risks can be given a safety net (for a price). This is where the invention of modern-day insurance came from. The actuarial science associated with determining the level of risk of an activity or potential loss is the thing that drives the industry. The question the insurance carriers want to know is the probability a customer will experience a loss, and they will need to fulfill the contract and pay to make the customer whole again. Their assessment of the risk drives the price of insurance in almost all instances. When rates differ greatly, the answer to that question of risk often differs from company to company. Some companies don’t want to take any risk and therefore decline or cancel a policy. Some companies are ok with writing a specific type of risk, but they want to be compensated much more for their risk. Conversely, some insurance companies may want to grow in a specific market, and therefore they will take a greater risk by insurance those who other companies won’t.

At the end of the day, we all assume risk. We live and breathe risk and reward. Often times taking a risk can be one of the most rewarding experiences in life when it pays off. Don’t be afraid of risk, but just like an insurance company… educate yourself on the risk to decide if the reward is worth it.