Risk Management

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Risk Management

Defending Your Goals against the Adversity of Life

Nobody knows what tomorrow may bring or what might get between you and your financial dreams. Any solid wealth management plan must account for the unforeseen, especially those events that could be devastating to your financial goals. Risk management can also be applied to investing, but here we are primarily talking about risks that are large enough that your investments are unlikely to be able to deal with them alone.

Insurance is often the answer when dealing with risks that are too large for your portfolio to handle. However the risk management process doesn’t demand insurance necessarily – only that we define the risk and determine how to deal with it. Some of these risks include:

Risk of dying too young – This is always challenging to discuss, but if you are serious about your family’s well being this simply should not be ignored. The loss of a loved one is emotionally devastating, but it is only worsened if it brings financial catastrophe as well. Life insurance is almost always the appropriate answer to deal with the loss of income, the need for liquidity and the funding of the goals that need saving for. We focus on your unique needs, and build a life insurance program designed for each client. Unfortunately Summit has experienced tragic loss in our client base on multiple occasions, and the life insurance in force was always a blessing to the family.

Risk that disability will prevent you from earning a living – disability is the forgotten risk among our fast moving culture. However, you may be more likely to be disabled for a period of time prior to age 65, than to pass away before retirement age. Replacing lost income when all the family goals still continue is a major challenge. Although some companies provide baseline coverage in this area, far too many people are exposed to this risk.

Risk that declining health will cause financial strife – It’s no secret we are living longer, but unfortunately we often lose our ability to completely care for ourselves in our later years. The cost of care in these situations is enormous, and Medicare may not cover much of what might occur. Statistics show that almost 70% of all adults will need some Long Term Care during their lifetime (1). Depending on the level of care needed, the cost of care could approach $10,500 per month today, and is expected to double in the next 20 years (2). This is a unique area where the insurance products are changing as fast as the cost of care is rising. We spend careful time determining how to deal with the risk of Long Term Care and what, if any, insurance products you would like to implement to mitigate it.

While planning for these contingencies doesn’t lead to the most enjoyable discussions, they are some of the most meaningful. Risk management requires one to think about others, especially family, and how they would be impacted if one of these events occurred. We have experienced some emotional and touching stories as clients relayed how much their loved ones mean to them and how we should protect their future. Risk Management is a safety net for the lives of your loved ones, and we don’t plan to walk life’s tightrope without that net!

 

Sources: (1) U.S. Department of Health and Human Services. (2) Genworth Cost of Care Study 2014
Life insurance products contain fees, such as mortality and expense charges, and may contain restrictions, such as surrender periods.
Separate from their role as financial planner, an advisor may recommend the purchase of specific investment or insurance products or accounts. These product recommendations are not part of the financial plan and clients are under no obligation to implement them.