Different techniques for handling risks will be appropriate depending on the probability and degree of financial severity. You probably won't be able to afford to insure events that are both very likely to occur and that would be financially devastating. On the other hand, it won't be worth insuring or spending much time on events that are unlikely and wouldn't pose much financial risk anyway.

The chart we used earlier to categorize events according to their probability and potential financial severity now becomes a tool to suggest what measures may be appropriate for dealing with the events.

You may want to print this page so that you have this chart to refer to.

		High	Low
	High	Suggested technique: Remove the risk or reduce it to an acceptable level. Why: Insurance will probably be unaffordable. If you bear the risk, you might face bankruptcy or loss of major assets.	Suggested technique: Transfer or reduce the risk. Why: If you bear the risk, you might face bankruptcy or loss of major assets. Totally avoiding an event is not always possible, and it may be highly inconvenient or costly to do so, especially for an event that is unlikely.
	Low	Suggested technique: Bear the risk and reduce the likelihood or the amount of damage. Why: Even if insurance is affordable, the cost will be high in relation to the benefit. Totally avoiding an event is not always possible, and it may be highly inconvenient or costly to do so, especially for an event that does not pose severe financial risk.	Suggested technique: Bear the risk. Why: Insurance is generally unnecessary for events that have little financial impact. It's probably not worth the effort to remove the risk, and may not even be worth the inconvenience of reducing it.

Now let's look at the most appropriate methods for handling each of your risks, based on the way you rated them on financial severity and probability. You may review and change your ratings before you check for the most appropriate methods.

You may be surprised by some of the recommendations. For example, you may have believed that everyone needs life insurance. But if your death would have a low financial impact or if the probability of your death is high, you will see that techniques other than transferring (insuring) are recommended. Under this framework, only someone whose death would pose a financial hardship (such as someone who has dependent children) and for whom death is unlikely should insure his or her life. Others should be using different techniques, such as setting aside enough money to pay for your burial (bearing the risk) and seeking ways to reduce the size of the financial risk, such as structuring your estate so that a family business won't have to be sold to pay estate taxes.

You must make the final decision as to what is feasible or appropriate for your situation, but these suggestions may help you to recognize changes you could or should make in managing your risks.