Page 160 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Unit 8: Insurance Planning

8.8 Personal Risk Management Notes

Personal Risk Management is looking around your home and your life, recognizing risk, and
planning what to do about it. Corporations recognize that in business, just about the only sure
thing is that you will have risk. According to a global study of financial institutions by Deloitte
between the years 2002 and 2004, there was a twenty-five percent increase of board-level oversight
in corporate risk management. In the corporate world, risk management referrers to a company’s
evaluation of its exposure to risk identification. A company may be able to identify risk easily,
because it comes in the form of a decision. At other times, a company may faces risks and not
even be aware of them. The majority of corporations have developed risk management programs
and invest time and money into implementing changes and insuring exposures.
Personal Risk Management is exactly the same thing. I actually, consider insurance and personal
risk management part of our family financial planning. When I was an active insurance agent a
common question my clients would ask was, “How much Insurance should I have?”
A good insurance agent will answer that question with something like, “You need enough
insurance to protect your assets, and you have to decide how much and what kind of risk are you
willing to assume?”
Your personal risk management strategy may have a major impact on your family’s financial
bottom line. Cutting losses at the right time can save your family thousands of dollars. If you are
an active and involved family, or expose yourself to a risky opportunity such as leading a youth
or sports group you may want to consider this in they amount and type of personal liability
insurance you carry.
If your financial goals include planning for your future and investments of any kind, then risk
management should be a key part of your overall strategy. As you build an investment portfolio
insurance and risk management should be a major consideration. For example, investing in
rental property can be a very stable, relatively low risk investment. Deciding how much insurance
and what type of coverage you need includes the consideration of all of your investments. Good
well-written Landlord insurance coverage may offset the costs, or liability, of the rental house
“stories” most landlords gather along the way.
When you have identified a risk your family faces, you need to decide how you will deal with
the worst-case scenario. When deciding what and how much to insure it’s up to you to identify
the personal risks you are exposed and how much you can or are willing to pay if the worst thing
happened. This series of Blogs will be a step-by-step guide to reviewing personal risk
management.

The first and most important step in Personal Risk Management is to determine what you have
and what you need to protect. Insurance is about protecting your assets and deciding what to do
in the worst case scenario. The amount of insurance a person or family needs, depends on what
they have to lose both in material property and financial security for the future. Success and
building a secure financial foundation for you and your families future changes and grows as
families learn to manage their risks and plan for life events.
What you insure, the value you insure for, and the deductibles you are willing to afford will
determine the amount of insurance you need to be sure you family remains in the same standard
of life no matter what happened. As families invest in their future, amass wealth, plan for
retirement or provide for the needs of the family insurance should be one of the important
things and part of sound personal risk management.

One of the big questions people (client) asked to their insurance agent is, “How much insurance
do I need?” The answer is always the same, you need enough insurance to protect your assets.

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