Risk Management

Risk management is intended to minimize financial and other losses potentially associated with risks to your health, family income, personal assets, savings and investments, and business. Some examples of risk are personal and professional liability, property loss, and catastrophic illness or disability.

Your first line of defense is to identify potential sources of risk and determine strategies to either avoid or minimize the major risk exposures. Your last line of defense is insurance. Risks to longevity and good health are clearly affected by both genetics and lifestyle. Factors known to improve our physical and mental well-being are highlighted regularly in the media—weight control, proper eating habits, regular aerobic exercise, and smoking cessation. We are also faced with choices each day that potentially impact our well-being, such as driving speed and the choice of whether to wear a seat belt. You have no control over your genetics, but you do have control over how you live your life. The most important benefit would, of course, be to improve and maintain your quality of life. Healthy lifestyle choices can also have a direct impact on your health care costs and insurance premiums.

Income protection planning helps protect you and your family in the event of disability or premature death. The objective of income protection planning is to enable you and/or your family to maintain the lifestyle you are accustomed to in the event the unexpected happens. As discussed, genetics and lifestyle affect your risk profile and are key factors to be considered. Health status, your career choices, and physical endeavors (i.e., mountain climbing, parasailing, hang gliding) are also considerations. While your employers may provide some life and disability coverage, the cost of maintaining this coverage when you leave the company—if it is even possible—is often prohibitive.

Risk management within your investment portfolio must take into consideration your personal risk tolerance, which is determined partly by your investment time frame, potential need to access the funds, and your ability to sleep at night despite a certain percentage of fluctuation in the value of your accounts. Market risk, credit risk, interest rate risk, and political factors are also considerations, and you should meet with your advisor at least annually to review your risk tolerance, changes in your personal situation, and the risks within your portfolio.

Risks to your savings include, as discussed, disability and premature death. The other risks that must be taken into consideration include taxes, interest rate fluctuations, and inflation. Asset protection planning manages risks to your wealth. Lawsuits, accidents, property damage, and other financial risks are facts of everyday life, and asset protection planning looks to transfer the risk of these events through:

• Insurance
• Repositioning asset ownership
• Other protections available under the law

Business ownership carries its own set of risk exposures. Certain factors can have a huge impact on how safe your personal and business assets are from risk. Business risk management identifies your options for handling these risks. These include:

• The type of business entity you choose
• The state you choose to do business in
• How you manage your business
• Your human resources
• Your taxes

Fixed insurance products and services offered through CES Insurance Agency.