Risk Management Planning
Uncompromised Risk Management Planning
The art of efficient risk management is to manage the risks that you are capable of managing and to insure against those you can’t. In the financial planning context the risks you cannot manage are your death or incapacity before retirement. These events will interrupt the income required by yourself and/or your dependents, and will also interrupt the accumulation of capital for retirement. Insuring against unforeseen risk is therefore essential when investing in your future.
You need life cover for the following primary reasons:
- To cover your liabilities and meet any claims that may arise against your estate, including estate duty.
- To provide sufficient capital for your dependents in order to maintain their standard of living.
The risk considerations applied to life cover are equally relevant to the risk of becoming disabled and unable to earn a living. Disability cover is available in two forms:
- A lump sum – if you become disabled the insured amount will be paid to you free of tax. The definition of the term “disability” varies depending on the nature of your occupation.
- Income replacement – if temporarily incapacitated and unable to work you will receive an income to replace the income you could have earned, for as long as the incapacity persists.
Dread disease cover
Dread disease can strike at any time and can have an impact on the sustainability of your investment strategy. Therefore serious consideration needs to be given to insuring the possibility of loss of income and expenses that result from suffering from such a disease.