Many affluent individuals and families ask if they need a personal risk management strategy. The answer is “yes!” Preparing a strategy is key to protecting your assets and safeguarding your legacy. And, working with a professional insurance broker experienced in the high net worth market will allow you to identify and mitigate your potential risk factors.
The goal in developing just such a risk strategy is to design your insurance portfolio so that you and your family have maximum coverage but are able to select from a variety of techniques to manage your risk and the cost of coverage.
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When you think about your lifestyle, your family and your priorities, what keeps you up at night? Many individuals with substantial holdings have multiple custom homes, luxury automobiles, valuable collections, yachts, etc. Also to be considered are your family members and domestic employees. How are your holdings structured? Do you hold properties in trust or under an LLC?
You can avoid unnecessary risk to your family and your lifestyle by putting a personal risk-management strategy in place.
Identifying exposures, then, is the first step in your strategy. Examining these factors and how a loss might affect you and your family will help you make the necessary decisions on how best to move forward with your coverage options.
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The next question is, how do you manage the risks associated with your lifestyle? After all, every high net worth individual or family has unique needs. That’s why there are several options in risk-control methods. You can avoid the risk, retain the risk or reduce the likelihood that the risk will occur. You can also transfer the risk through the purchase of an insurance policy.
If you participate in hazardous hobbies or recreational activities, you may decide to avoid those activities as a solution to the high cost of liability coverage associated with them; this would be an example of risk avoidance.
Retaining the risk involves self-insuring or agreeing to a higher deductible; this method can be used if the cost of insuring is higher than the possible loss. With the retaining method, you should assess each risk or financial exposure to determine the threshold at which it doesn’t make sense to self-insure.
Similarly, risk reduction can be achieved by taking steps to reduce the likelihood of a risk occurring, or minimizing the amount of the potential loss.
Some simple risk-management techniques include installing fire detection or sprinkler equipment in your home, pruning trees if you are in a wildfire region and installing a monitored security system.
The decisions you make regarding your personal risk-management strategy should be made with the advice of a professional insurance agent who has experience working in the high net worth marketplace, along with your wealth advisor and attorney. Once you have a plan in place, make sure you follow through with its components, and notify your insurance agent if there are any changes in the structure of your program, such as the purchase or sale of a home, a marriage, a death, etc.
You can avoid unnecessary risk to your family and your lifestyle by putting a personal risk-management strategy in place. Doing so will give you the peace of mind that you are protecting your assets and your legacy.
