Insurance & Risk Management
Updated: Feb 2, 2021
What is risk management?
According to Wikipedia, Risk management is the identification, evaluation, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.
Using insurance risk management protocols and option are the quantification of any likelihood of a given event and its ultimate financial impact. Rolling the risk over to an insurance company makes both short-term and long-term sense.
So, what are the odds, really?
· winning Lotto 649 are about 1 in 13 Million
· becoming disabled for a period of 2 to 5 years are about 1 in 3 during working years
· experiencing a critical illness are about 1 in 3 (Cancer, Heart Attach & Stroke accounting for approximately 83%)
· dying is guaranteed to be 1 in 1 … and obviously, as some put it, “No one gets out of this gig alive"
All insurances are designed to provide a financial safety net when certain things happen.
What will be the financial realities for you and your loved ones, your clients and their loved ones when the reality of a critical illness, death or disability strikes?
Each of us has the opportunity to leave behind a legacy – or will the legacy we leave be the problems we’ve left behind?
What is the history of Life Insurance?
There is much information on this topic, and we could discuss this for many pages.
However, the relevant matters are that societies since the Roman era have experimented with insurance type of protocols to reduce and spread given risks and protect families that were part of the scenario at the time.
Ultimately England began to foster the first formal types of life insurance contracts similar to today. Actually, in the first wave of globalization from the 1880s onwards, these life insurers found ways of offering their services beyond the British colonial model, insuring indigenous populations and seeking out opportunities in China, Latin America, and the Middle East, as well as the US and UK.
The capital inflows from this international expansion were encouraged by Canadian regulators, who understood the benefits of a domestic life industry investing a good proportion of its investment capital in the young country.
Life insurance has been popular in Canada for more than 100 years – the country now offers a wide variety of products, policies, and providers across all its provinces and territories. As of 2014, 22 million forward thinking Canadians hold some form of life insurance to ensure the future security of their families.
Even Winston Churchill expressed:
“Is there any better risk/reward arrangement than putting life cover in place to protect a family?”; and goes on to say“If I had my way, I would write the word “insure” upon the door of every cottage and upon the blotting book of every public man, because I am convinced, for sacrifices so small, families and estates can be protected against catastrophes which would otherwise smash them up forever.”
It is a classic risk and reward calculation; is the risk to a family of losing a bread winner worth taking where there is no life assurance cover in place?
The answer to this is likely to be no in all but the most extreme of cases.
The risk on its own is just one consideration; the cost of taking this risk out must be brought into the equation. And the cost is normally very low in relation to the benefit.
What about costs?
The cost of a life assurance policy is based on a range of factors such as the age when the policy is taken out, the length of policy term, amount of coverage required as well as the health of the applicant at the time of application.
Generally speaking,the overall base cost of a policy is very low in proportion to the considerable benefit provided to families – and mind also – it is a tax-free benefit in most cases.
Yet, it is important to buy it well!
What does that mean?
Well, cheapest is not always best (as really with anything else in life that one can purchase), and thoughts towards the long-term with longer lifespans need to be seriously considered.
Most term policies naturally expire after their final renewal at age 75, and then for most people it simply is unaffordable to continue. This results in not having coverage when needed most - after decades of paying premiums.
What if one could obtain life-long customized coverage with the best companies and the best reputations, all with no ‘Net cost’?
We pride ourselves in guiding our clients to obtaining something that will be a service life-long with no end cost and many advantages for the short, mid and long-term
Many of our clients are experiencing this evolved way of looking at this. Future newsletters will continue to touch on this, yet for more details, please reach out and allow us to explain more.