Risk management is the process of identifying, reducing, and preparing for financial risks that could disrupt your life, goals, or plans. Insurance is one important tool, but effective risk management also includes protecting yourself from identity theft, fraud, and scams. These risks can drain your accounts, damage your credit, or compromise your personal information. By learning how to spot, prevent, and respond to these threats, you strengthen both your financial security and your peace of mind.

Identity Theft, Fraud, and Scams

Overview

Identity theft occurs when someone uses your personal information without permission. Fraud and scams attempt to deceive you into giving up money or sensitive information. These can occur online, by phone or text, through social media, or even from stolen mail or physical documents.

Common Types

Identity Theft: credit card fraud, tax ID theft, FAFSA or financial aid scams, stolen mail, skimming devices.
Fraud & Scam Attempts: phishing emails, text scams, romance scams, fake job postings, “urgent” or threatening calls.

Financial Fraud (Ponzi, Pyramid, & “Prize” Scams)

These scams rely on unrealistic promises, secrecy, or urgency. Examples include Ponzi schemes, pyramid schemes, fake investment opportunities, and “you’ve won a prize” scams that require you to pay a fee upfront.

Tip: If something sounds too good to be true—or too urgent to think through—it is likely a scam.

Warning Signs

Unexpected charges on your accounts
Emails or texts asking for personal or financial information
Pressure tactics like “act now,” “don’t tell anyone,” or threats
Credit denial when you haven't applied for new credit
Notices about accounts you never opened

How to Protect Yourself

Use strong, unique passwords and enable two-factor authentication
Shred documents and protect your SSN
Review your banking and credit card statements monthly
Be skeptical of unsolicited calls, messages, or offers
Consider placing a free credit freeze if not seeking new credit

If You Become a Victim

Respond quickly to limit financial or credit damage.

Place a fraud alert or credit freeze with all major credit bureaus
Notify affected businesses and dispute fraudulent charges in writing
Report the incident at IdentityTheft.gov
Contact your bank or credit card issuer immediately
File a police report if necessary
Check whether your insurance provides identity restoration assistance

Resources

Equifax: Types of Identity Theft
FBI: Common Frauds & Scams
FTC: Scams & Identity Theft
IDTheft.gov: Warning Signs
CFPB: Fraud & Scam Information

Insurance

Understanding Insurance Basics

Insurance helps protect your finances by transferring the cost of unexpected events—car accidents, medical emergencies, property damage, injuries, or loss—to an insurance company. The goal is not to eliminate risk entirely, but to make unexpected events more financially manageable.

Key Terms

Premium: What you pay (monthly or annually) for coverage.
Deductible: What you must pay before insurance begins covering costs.
Co-pay: A fixed amount you pay for certain services.
Out-of-pocket maximum: The most you will pay in a year; beyond this, insurance pays 100% of covered costs.

How Insurance Companies Work

Insurance companies pool risk across many policyholders. They invest premium dollars in assets like real estate, stocks, and bonds and use investment earnings to pay claims. Because they are for-profit businesses, understanding their incentives helps you choose coverage that provides appropriate protection without unnecessary overspending.

Evaluating Your Current Insurance

Is your liability coverage high enough to protect your assets?
Do you have dependents who rely on your income?
Would disability insurance protect you if you could not work?
Are your deductibles realistic for your budget?

Types of Insurance

Health Insurance

Health care can be extremely expensive without coverage. Health insurance helps manage both predictable costs (premiums) and unpredictable costs (medical emergencies). You can obtain coverage through employers, the marketplace (healthcare.gov), Medicaid, Medicare, or state-based programs.

Common Coverage Types:

Fee-for-service — flexible but typically more expensive.
HMO — requires referrals; often lower cost.
PPO — more flexibility with providers; higher premiums.
High-deductible health plans (pairs with HSAs).
COBRA continuation coverage after leaving a job.
Marketplace plans with tiered metal levels (bronze, silver, etc.).

Related Tools:

HSA: Tax-advantaged savings for medical costs; available with HDHPs.
FSA: Pre-tax funds for health expenses; “use it or lose it” rules may apply.

Auto / Car Insurance

Required in every state, auto insurance covers damages, injuries, and liability from accidents. Each state sets minimum liability requirements (for example, Oregon’s 25/50/10 rule).

Common Coverage Types:

Liability: Covers injury or property damage you cause to others.
Collision: Pays for damage to your vehicle after an accident.
Comprehensive: Covers non-collision damage (theft, fire, weather).
Uninsured/Underinsured Motorist: Protects you if the other driver lacks insurance.
Personal Injury Protection (PIP): Covers medical expenses regardless of fault (state-dependent).

After an Accident:

Stop safely and check for injuries; call 911 if needed.
Exchange all required information (name, license number, insurance details).
Take photos, collect witness information, document everything.
Request a police report if applicable.
Avoid admitting fault or signing anything except a ticket.

Renters or Homeowners Insurance

These policies protect your belongings and provide liability coverage. Homeowners insurance also covers the structure of your home. Understanding perils (causes of loss) and hazards (conditions that increase risk) helps you evaluate your needs.

Homeowners Coverage Areas (HO Policies):

Dwelling and property replacement
Other structures (garages, sheds)
Personal property
Loss of use
Liability coverage
Medical payments

Renters Insurance: Covers your belongings and liability—not the building. Often low-cost and can be bundled with auto insurance for savings.

Life Insurance

Life insurance provides financial support to others if you die. It can replace income, cover debts, or pay end-of-life expenses. Consider it if someone depends on your income, or if you share debts with others.

Types of Life Insurance:

Term Life: Covers a set period; simple and affordable.
Permanent Life: Lifetime coverage; more complex and expensive.

Disability Insurance

Disability insurance replaces part of your income if you cannot work due to illness or injury. Many people underestimate the likelihood of disability during working years, making this a crucial but often overlooked tool.

Coverage Types:

Short-term disability: Covers up to 6–12 months.
Long-term disability: Begins after a waiting period; may continue for years.

Definitions Matter:

Own-occupation: You are disabled if you cannot perform your specific job.
Any-occupation: You are disabled only if you cannot perform any job.

Identity Theft Protection Tools

You’ve already learned about fraud and scams. Some insurance products and third-party services offer additional monitoring and recovery support.

Common Features:

Credit monitoring: Alerts you to changes in your credit report.
Dark web or breach monitoring: Notifies you if your information appears in known data breaches.
Identity theft insurance: Helps reimburse restoration costs (not fraudulent purchases).
Recovery specialists: Provide step-by-step support.

Important Notes:

Identity theft insurance does not reimburse all losses.
You can take many steps for free (credit freeze, fraud alert, free credit reports).
Some monitoring services are already included with credit cards, employee benefits, or renters insurance.

Insurance Resources