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Risk Management Planning

Understanding Risk Management Planning

Health Coverage for Every Stage of Life

When questioned about risk management, most people only think about life insurance. While life insurance is an important part of any risk management planing, there’s much more.

Ideally, your risk management plan should address all risk factors, including:

  • the risk of death;
  • the risk of disability;
  • the risk of illness;
  • the risk of damage or loss of property;
  • the risk of owning and using an automobile; and
  • the risk of causing injury to another’s person or property.

A summary of the risks that that you face and the possible resulting financial impacts are shown below.

 

Personal Event

Possible Financial Impact

Disability

Temporary or long-term loss of one income, loss of services (e.g., may need a replacement caregiver for small children), increased expenses to accommodate disabled person

Illness

Temporary or long-term loss of one income, loss of services (e.g., may need a replacement caregiver for small children), major medical or chronic care expenses

Death

Permanent loss of one income, loss of services (e.g., may need a replacement caregiver for small children), final expenses (burial, income taxes, etc.)

Property loss (e.g., catastrophic damage to property, theft)

Cost of replacement or repair

Liability

Legal expenses, claims and settlement costs

How Much Life Insurance Should You Buy?

Common Risk Management Goals and Objectives

  • ensure that the family has adequate resources to maintain a certain lifestyle in event of the client’s death, and to pay the costs associated with that death;
  • ensure that the client’s estate has sufficient funds to provide for children’s education and/or legacies in the event of the client’s death;
  • ensure that the family has adequate resources to maintain a certain lifestyle and to cope with the increased costs that could be associated with the client’s disability or major illness;
  • ensure that a business interest is protected in the event of the client’s death, or the death of a partner, shareholder or key employee;
  • ensure that the expenses related to the family’s health care are manageable and will not derail the client’s financial plan;
  • protect the client’s family from damage or loss of personal property; and
  • protect the client’s family from liability claims arising from their ownership and use of property.

If you own a business you face additional risks as follows.

Business Event

Possible Financial Impact

Loss of Key Person

Key person insurance can help preserve the value of your business and its continuation in the event of the death of a key stakeholder in the company. Replacing the expertise and knowledge of an essential individual can take time and money and can jeopardize the continuity of the business. This can be insured about using “key man or key person insurance”.

Incorporated,
owner dies prematurely

In this event were to occur, the agreement between two or more business owners specifies that on the death of a shareholder, the surviving shareholders are obligated to purchase the shares of the deceased shareholder. 

What Can be done? Each shareholder of the corporation is the owner and the beneficiary of a life insurance policy on every other shareholder. If one of the shareholders dies, then the life insurance
proceeds are paid to the surviving shareholders who would each use the proceeds to
purchase the deceased’s shares.

 

Good Risk Management Planning Articles

Good Risk Management Planning Articles Below is a collection of what I consider good educational articles about Risk Management Planning. Life insurance: Is “Term Life” always enough? Most families are better off buying cheap, straightforward term insurance, but there are situations where universal or whole life policies make sense..…read more Disability and Critical Illness Insurance: …

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Travel Insurance Rider for Hockey Players

Travel Insurance Rider for Hockey Players I know a lot of individuals who travel to the US for hockey tournaments or exhibition games. Last year, TuGo Travel insurance added a “rider” for sporting events like hockey to be covered. A “rider” is an addon to a basic travel insurance policy. In a recent discussion with my …

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How Much Life Insurance Should You Buy

How Much Life Insurance Should You Buy If you are looking to purchase life insurance, how do you determine how much to buy? The first step is to determine what your needs are. Here is a very simple case study to demonstrate the process. In this case study, the client assets are $50,000 of group life insurance and a …

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Understand Your Life Insurance Options

Understand Your Life Insurance Options If you own life insurance and have held policy(ies) for several years, I wanted to demonstrate a few simple ways to reduce your life insurance premiums substantially compared to what you pay now. Below I explain how and include a simple case study.   The Process I have recently implemented …

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Travel Insurance for Frequent Travelers

Travel Insurance for Frequent Travelers As you may be aware, I offer travel insurance as a “life-licensed” broker. I strongly believe in travel insurance because for a few dollars a day, it covers you and your family if a “major medical emergency” were to occur when you were travelling outside Ontario. The cost outside Ontario …

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