Family Risk Management refers to the approach that helps in the reduction of risk to the family through various risk management programs. It is a part of personal insurance.
It involves analyzing the insurance needs of a family, evaluating the risk profiles, and making suggestions for managing the overall risk exposures. Family risk management provides insurance solutions, and advice to avoid risks.
Many insurance companies offer Risk Management Programs for families to avoid risks, by evaluating the family’s current risk exposures, and advisors and experts to consult the family members.
Risk factors the family deals with:-
- Serious Illness
- Losing their jobs or source of income
- Financial Crisis
Sometimes financial plans or good investments cannot help the family from the crisis. Having proper insurance policies and proper planning related to finance can help to overcome the issues.
Besides this factor, every family should take care of the following plans also:-
- Planning for education: Every family should plan for the education of their children and save according to future expenses.
- Handling sudden situations: Unexpected needs will come in everyone’s way, so every family should be prepared for every possible situation, such as buying a new house, serious illness, unexpected expenses, etc.
- Safety risk: There should be planning for handling the safety risks such as the protection of family, goods, and property.
Risk Management Process
- Identifying long-term family goals.
- Analyzing the family goals to identify risks associated with them.
- Estimate the probability of occurrence of risk and impact of risk on the family.
- Plan strategies to avoid top-priority risks.
- Family’s responsibility towards the resources.
- Monitoring risks and their impacts.
Identifying long-term family goals: Every family should plan for their long terms goals and plan according to them. This will help in reducing risk.
Analyzing the family goals to identify risks associated with them: Once family goals are identified, the risks related to them or the risk that will come in the future for completing the goals can be identified.
Estimating the probability of occurrence of risk and impact of risk on the family: Estimating the probability of risk, will provide extra cover and solutions for the family to deal with the risk. Risks can be measured on a scale of 01-10.
Plan strategies to avoid top-priority risks: The assistance of experts and insurance agents will help in avoiding top-priority risks and managing them.
Family’s responsibility towards the resources: It refers to the commitment of the resources which can be financial capital as well as human capital
Monitoring risks and their impacts: The purpose of risk monitoring is to highlight whether the strategies are effective or not, it can also lead to the identification of new risks in a family.