Personal risk management is the process of applying risk management principles to the needs of individual consumers by identifying, measuring and treating risk. Typically, personal risk is associated with financial investments and insurance. These could include stock market investments, mutual funds or liability insurance. You can avoid unnecessary risks to your family and your lifestyle by implementing a personal risk management strategy.
One of the easiest ways to implement a personal risk management strategy is by finding ways to avoid risk in your daily life. This is when you work to eliminate any potential hazards that could harm you. For example, if your town doesn’t have a bike lane on certain streets, you would be sure to take the streets that do have bike lanes to minimize the risk of being struck by a vehicle.
Working from home during shelter-in-place is an excellent time to perform a personal risk audit. Explore the following 7 areas to identify where you make risk management improvements from the comfort of your home.
Life insurance
If your family relies on your paycheck or the services you provide (like childcare), then you need life insurance to ensure they will still receive care in case of your death.
Additionally, if you have large personal loans—such as student loans—that don’t have equity, you’ll want insurance that can cover those debts.
Disability insurance
If you broke your arm and couldn’t type, or got into a car accident and couldn’t walk, working would be difficult if not impossible. While many individuals receive disability insurance through Social Security, that benefit will not replace your entire paycheck. If you’re financially dependent on your paycheck, you must have disability insurance.
Emergency fund
Did you know about 40% of Americans wouldn’t be able to cover a $400 emergency expense? What happens when the unexpected occurs, like the refrigerator or the water heater going out? An emergency savings fund ensures you have easy access to cash.
Your emergency fund should be stored in a savings account or CD so that it’s not subject to market movement. While a savings account is ideal, if you have a high credit limit, you could consider utilizing CDs for a higher interest rate, knowing that you could pay yourself back even if it takes a little longer to access your funds. A good rule of thumb is to save for 3-6 months of expenses (not income).
Work on your skills
Your income relies on your job, which depends on your skills. The stronger your skills, the higher your compensation. While you have time at home, explore ways to improve your skills to bring more value to your employer and increase your worth in the marketplace.
Lynda.com is a great site for online classes. You may have access to resources like online courses and language learning through your local library. Additionally, a simple Google search will provide many resources in varying formats to align with your learning style and interests.
Update your will
While it may seem morbid to create your own will, you must eventually make decisions about what happens to your estate when you’re gone. By making these decisions now, you guarantee that your wishes are met.
If you already have a will established, connect with your lawyer to ensure that your will has been updated to reflect family changes and asset acquisitions or sales.
Homeowners’ or renters’ insurance
These policies will cover damage or theft to your property, in addition to any medical bills for accidents that occur on your property. Have a closet full of designer clothing or a large outdoor pool? You’ll want higher coverage to balance the increased risk of expensive or risky assets.
Fireproof safe
Have some extra cash on hand? Consider getting a safe deposit box or fireproof safe for your assets and paperwork that need more protection than just a shoebox under the bed.
While we’re on the subject, now is also the perfect time to ensure all your smoke detectors and carbon monoxide detectors have working batteries and are up to code.
If you’re stuck inside, use this time to evaluate, mitigate and shift any potential personal risk. While you’re at home, take the time to work through various risky scenarios and situations to ensure you have a plan in place in case of an emergency.Now is the perfect time to assess your risk so you can take action to minimize the potential impact. Take this quiz to find out your personal risk score.