Preventing Your Personal Catastrophe (on a Budget)

In the insurance business, an agent like me has to get used to the fact that I provide a product that most people aren’t very fond of.  I get passed this disappointment with the confidence that if I do my job right, then I’ll have truly made a difference in somebody’s life.  To me this means that my client is not left in a financial ruin after a major catastrophe.  However, I don’t believe, nor do I recommend, covering every single contingency life can throw at a person.  Therefore, I have established a five step process to help clients remain financially catastrophe-free and do so on a budget.  You can use this process yourself.

First, identify personal risks.  Everyone’s risks are different.  Understanding your risks is the first step towards putting together a comprehensive, sensible plan.  In my experience, many people piece together various protections and have never looked at the big picture to understand what their risks actually are in totality.  In the process of identifying your risks, consider the impact of all four types of losses including life, health, property and liability.  Property risks are generally simple to quantify.  Life, health and liability risks require more thought and consideration.

Second, prioritize personal risks.  Once you understand the big picture, the second step is to identify what’s important to you.  For example, a person without dependents generally won’t need to be as concerned about financial risks from dying.  A person who is retired won’t need to be concerned about losing income due to an illness, but might be concerned about the financial implications of requiring nursing care.

Third, establish a budget to protect yourself from the risks that could upend your life.  Most people can’t afford to cover every contingency in life.  It’s important to strike a balance between monthly expense and potential disaster.

Fourth, establish a plan that ensures that your catastrophic exposures are covered while you are self-insuring risks that you can absorb.  This is accomplished by doing things such as carrying adequately high liability coverage while raising deductibles to the maximum threshold.   

Finally, put the plan in place.  The best laid plans are worthless if they’re not put in place.  However, once you have created a plan and put it in place, you can sleep soundly knowing that your catastrophic exposures are covered.  You’ll be the exception to the rule and one of the few people who can say that.  Furthermore, knowing that you’re properly structured affords you the freedom to use your remaining financial resources to pursue your passions in life.  Everyone should be so fortunate.

Richard Braun is the founder and President of The Braun Agency.  Richard holds his Certified Financial Planner designation and is a business graduate from Old Dominion University.  The Braun Agency covers Hampton Roads better than anyone with offices on both the Southside and Peninsula and nine licensed agents with over 160 years of insurance experience.  To reach the Braun Agency, call 757-INSURANCE (757-467-8726) or go to 757insurance.com.