Tips for Your Holistic Approach to Risk Management and Insurance
By Laura Sherman, CAPI, CPRM, Founding Partner
If you are like most successful consumers, even the more savvy ones, you separate your business and personal insurance into different policies, with different agents for each. Life rarely fits into neat, orderly silos marked “business” and “personal.” By taking a holistic approach to risk management and your insurance program, you can ensure that your assets are sufficiently protected.
1. Prevent losses before they occur.
There is a reason for that old saying, “An ounce of prevention is worth a pound of cure.” Along these lines, you can employ countless risk management tips that cost little to nothing and go a long way in preventing losses. For example, water damage is one of the most common homeowner claims. Yet up to 93 percent of common water damage can be prevented or minimized with proper maintenance and a few precautionary steps, including annual plumbing inspections and installation of stainless steel washing machine hoses.
2. Transfer risk.
There are several methods for successfully transferring potential exposures. Whether you choose to use asset protection vehicles (ensure that they are addressed in your insurance program), contracts or insurance, make sure you communicate with your team of advisors. One of the more common examples includes the titling of vehicles in a company name. Review the insurance purchased for those vehicles to ensure that all entities involved are protected in the event of an accident—including the most important one: you.
3. Think holistically.
Have an independent consultant, lawyer, wealth advisor or insurance firm analyze the current insurance and risk management structure for your business, your employees and your family from a convergent perspective. A simplified, collaborative process offers the benefit of cost efficiency and asset protection.
4. Purchase sufficient liability insurance to protect your assets.
An alarming number of wealthy individuals carry liability limits of five million dollars or less. Yet if you are held liable for an accident resulting in serious injury, the jury award or settlement could amount to tens of millions of dollars. If your insurance coverage falls short, the court can order the liquidation of assets or withhold your future earnings. Work with your team of advisors (your wealth advisor, CPA, lawyer and insurance agent) to determine the appropriate amount.
5. Address the needs of your lifestyle.
Discuss your lifestyle with your team of advisors. Lifestyle considerations include volunteering on a board or acting as a trustee, employing domestic staff or utilizing asset protection vehicles. While you may not necessarily need to purchase any additional insurance, a little risk management counsel goes a long way.
6. Review Periodically.
The tendency to keep personal insurance policies on auto-renew leaves many financially successful people exposed to the threat of lifestyle changes, a volatile and ever-changing insurance marketplace and potential uncovered risks.
By working with the right team of advisors, you can more strategically approach your insurance and risk management program and be more confident about enjoying the lifestyle you have earned.