Differences between hedging and insurance
Answers
Answered by
0
MONEYCAREERINVESTINGTHE BASICS
Difference Between Insurance and Hedging
September 29, 2011
By: Cam Merritt
ShareShare on Facebook
Insurance and hedging both reduce your exposure to financial risk, but they do so in different ways. Insurance typically involves paying someone else to bear risk, while hedging involves making an investment that offsets risk.

An insurance agent and her clients.
credit: BakiBG/iStock/Getty Images
Insurance Shifts Risk
Buying an insurance policy that protects your home against fire does not guarantee that your home won't burn down. Having auto insurance doesn't mean you won't crash your car, and life insurance won't keep you from dying. What insurance does is shift potential financial losses from you to someone else. If your house burns down or your car gets totaled, you don't have to pay to replace it because the insurance company does.
Similar questions