Everyone faces some level of financial risk but most people hope that catastrophe will strike someone else. Sadly ‘someone else’ may be you. This is why it is critical to review your insurances regularly and ensure they still meet your needs. Would you be able to cope with the risk of inadequate cover? Have you got too much cover? If circumstances have changed, have you adjusted your insurance?
You can be systematic in looking at the risks you face. Firstly, identify the risk, secondly analyse how significant the risk is, and lastly decide how you will handle the risk. Your choices are:
- Reduce the risk in some way (like installing burglar alarms),
- Build up sufficient financial reserves so you can manage a loss if it occurs (saving), or
- Buy protection in the form of personal insurance.
Everyone is different and for that reason we recommend a periodic review with a risk management professional such as your financial adviser.
To start with try this risk management test.
|What would be the effect on the financial position of your family if you:||
|If you ticked “A lot”, how would you handle this?|
|Lost your house?|
|Lost your car?|
|Lost your investment property?|
|Lost your personal effects?|
|Lost your income?|
|Were unable to work due to disability?|
It’s easy to tick a box quickly without too much thought. Make sure you consider issues such as:
- The rising costs of re-building your home and replacing lost assets.
- Debts secured against assets such as mortgages and investment loans.
- Providing for people who are dependent upon you. If the number of your dependants has reduced, you may have more insurance cover than you need.
- A change in marital status.
- Accumulated leave from your job (sick leave, long service leave and annual leave).
- Your health and those of your dependants.
But it’s not easy to work through this alone. Use this grid as a starting point and make an appointment to see us – we can ask the questions you haven’t thought of.
And don’t forget, next year you get to do it all over again because the only constant in our lives is change!