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Risk Management

Emergency Fund

Long-term investing involves risk and commitment.
Setting aside an emergency fund of 3-6 months
worth of expenses is critical. Nothing in the financial
world is more fully accepted than the use of an
emergency fund. Put the money in an account where
you can have easy access to the funds when you need it. High-interest savings account. You will lose the opportunity to see investment growth on this money. That is the cost of insurance.

Risk Avoidance

Many risks can be avoided by choosing to avoid certain activities. If you are concerned about the risk of being in a car accident, you can choose to walk or use public transit. If it is impractical for you to avoid the risk, you can reduce the risk by driving carefully, and maintain your car in order to be as safe as possible. Likewise, taking care of your health can improve your quality of living and your life expectancy, which is an important part of a complete risk management strategy.

Risk Retention

Some risks are small enough that you might choose to be prepared to cover the consequences of the risk yourself. Deciding to opt out of an extended warranty on a household appliance is an example of a risk that you might choose to retain, depending on the costs associated with the product.

Risk Transfer

When a risk is too big for you to manage on your own, the results could be catastrophic for your family, finances, and your lifestyle. It is important to use insurance to protect yourself from these types of risks. Consider whether or not your household could carry on in the event of a sickness or injury that prevented a family member from earning an income. Or how your family would get along in the event of the loss of a member.

Personal Insurance

Personal insurance is a key element of a complete financial plan. Protecting yourself and your family from the financial risks associated with loss of life, health, or the ability to earn an income, is very important and often overlooked.

There are six main types of personal insurance, designed to protect against various risks.

Life Insurance pays out a lump sum in the event of the death of the insured person. Common reasons for carrying life insurance is to replace income, pay off debt, or pay for final expenses in the event of a death. Because of the tax-free nature of the insurance benefit, in some situations, it can be used as an investment tool in order to reduce estate erosion, or as a pseudo-emergency retirement fund. This does not replace proper retirement planning.

Critical Illness Insurance pays a lump sum in the event that the insured person suffers a covered illness. The idea of Critical illness insurance came from a Doctor, whose brother had cancer. He survived, but with all the extra expenses associated with treatment, he wished he had died. 

Disability Insurance pays a monthly benefit in order to replace the income of an insured person who, due to accident or sickness, is unable to perform some or all of the duties of their job. Policies can vary in coverage length, amount, and definition of disability.

Extended Health Care Insurance covers dental care, prescriptions, optometry and more. 

Accidental Death and Dismemberment Insurance pays a lump sum if the insured dies in an accident, or loses the use of body parts. The payment can vary depending on the loss.

Long-Term Care Insurance pays a monthly benefit to an insured person who is unable to take care of themselves.