Risk Management

When working on any home project, you need to ensure that your toolbox is full of tools—not only enough tools, but the right tools. Insurance is an extremely important planning tool used to ensure that your family's income will not be adversely affected in the event of a family tragedy.

Rightfully, insurance planning represents the foundation of any successful financial planning pyramid. The strength of any pyramid relies heavily on the strength of its foundation. Therefore, it must be constructed first, and it must be constructed properly. An inverted pyramid does not stand up well to the test of time.

Risk management, a fancy term for insurance planning, more accurately describes the planning process: how much risk am I willing to accept, and how much risk do I wish to transfer to an insurance company? In regard to successful planning, this is a defining question; however, how do we solve this puzzle?

Figuring out how much risk to transfer to an insurance company depends on two very important questions relating to the thickness of your emotional security blanket: 1) What is the potential economic loss (financial consequence) associated with the risk, and 2) What is the probability of occurrence? This isn't as complicated as it sounds. A walk through the Yellow Pages provides us with a glimpse at the answer: How come there are only a couple of funeral homes listed but pages of physicians? Simple—we get hurt more often than we die. The next step is to quantify the financial consequence of each occurrence.

Insurance planning typically involves the following types of insurance coverages: health, disability, long-term care, and life (and variations of all). Our Yellow Pages' example shows that the funeral homes' listings represent life insurance planning and the physicians' listings represent health, disability, and long-term-care insurance planning. Having to deal with either could result in an enormous economic loss; however, the probability of a premature death is extremely small when compared with the probability of injury or illness. Therefore, economic loss for both is high, but the probability of needing health, disability, and long-term care insurance is significantly higher. As a result, health insurance is usually purchased before life insurance.

We help our clients to determine which tools (insurance products) may be used, most effectively, to insure their family's income during their working and retirement years. Collecting accurate client data helps us to help our clients to quantify their various insurance needs. We then educate our clients and present insurance-planning solutions to them that will aid in the insurance selection process.

Separate tabs have been created on our website for Long-Term Disability Insurance (LTD Insurance) and Term Insurance. As previously noted, a whole other website has been devoted to Long-Term Care Planning.