This is the risk that an investment will not generate desired returns due to higher level of prices. Higher inflation brings down, what is known as, real returns of the investment.
The individual must identify investments that are well-placed to negotiate the risks. For instance, take life insurance. An insurance plan that invests primarily in AAA rated paper nullifies credit risk to a large extent. This also takes care of liquidity risk as AAA rated paper is widely traded in the market. Of course, it might be too much to expect individuals to accurately interpret the risks associated with their life insurance plans. That is why it is a good idea to ask pointed questions to your insurance advisor or the company agent before investing in the plan.