Risk Management Strategies
Risk Management is having a plan in place to protect yourself, your family or your business if something unexpected was to happen and you were unable to continue generating income and working towards your financial goals. It is not something any of us like to think about or plan for but risk management is an essential part of your financial plan. GM Wealth can work with you to ensure you have the correct levels and types of insurance in place to continue to meet your financial goals even in unforeseen circumstances.
The types of insurance we recommend are:
- Life Insurance, providing your family with a lump sum payment if you were to pass away or be diagnosed as terminally ill. This lump sum payment can pay off an outstanding mortgage, meet their living expenses for a pre-determined amount of time and provide for children’s education costs.
- Totally and Permanent Disability Insurance (TPD), can provide for the same factors as life insurance with the addition of medical expenses if you were to suffer an injury or illness which left you unable to return to work ever again.
- Trauma Insurance, trauma insurance provides you with a lump sum payment if you were to suffer a critical illness. Research indicates that one in five men and one in seven women between the ages of 30 and 64 will suffer from critical illness. Critical illnesses include heart attacks, various types of cancers, stroke, chronic kidney failure and many more.
- Income Protection Insurance – provides you with a monthly payment of up to 75% of your income. You will receive this monthly benefit if you were unable to work due to illness or injury. The amount of time you receive the benefit (benefit period) and how long you need to be unable to work before you start receiving the payments (waiting period) vary and predetermined by you.
If you are a business owner, GM Wealth can help you have a financial plan in place, via insurance, to ensure if you, another business partner or key person of your business were unable to continue working there will not be a financial impact on the business and it can continue to operate. There are different purposes of cover all with great importance.
GM can help determine which insurance cover is essential to your business and the appropriate levels to be insured.
Some examples of cover we recommend where appropriate are:
Buy Sell cover
Sometimes things do not work out as we expect. It is therefore essential to have an exit strategy in place. Buy sell insurance cover is to provide protection to remaining business owners and the family or estate of the life insured in the event of their death or permanent disability.
Buy sell cover provides a lump sum payment to compensate the family or estate of the life insured for the transfer of the life insured’s share in the business to the surviving business owners, without further cost to the those same business owners. Funding the buy sell via life or TPD insurance means the financial impact on the business and surviving owners is minimised and your business can continue with minimal disruption.
The alternative is that the surviving owners use their own personal funds to fund the buyout of the exiting partners family or continue the business with the life insured’s family. This if often not a desirable or viable option.
Key Person Cover
The purpose of key person cover is to make sure that the business is not unduly financially affected by the unforeseen death or disability of a key person in the business. Usually a key person is essential to the performance and on-going profitability of the business. There are two types of Key Person cover:
Revenue protection: This replaces potential loss of income or profits and covers additional hiring and training costs to replace a key person.
Capital protection: This replaces loss of capital or repayment of debt and/or loss of goodwill.
GM Wealth Management will do a thorough analysis of your business, identify the risks you may face if things do not go to plan, and recommend a strategy in order to mitigate those risks.