“I have a policy” is usually where the conversation stops. It works much better as the place it starts.
Financial risk is not only the chance that an investment falls. It is any uncertain event that could damage your ability to meet important expenses or goals.
Examples include losing income, being unable to work, a serious illness, the death of someone the household depends on, an urgent property repair or a business interruption. The same event can affect people differently. The death of a family member may create both an emotional loss and a sudden loss of income, childcare or debt support.
Start with the consequence, not the product.
For each event, ask:
- Who or what would be affected?
- Which income or service would stop?
- Which expenses would continue?
- What money, cover or support is already available?
- How long could the current resources last?
A policy may well be relevant, but its benefit, definition, exclusions and affordability still need to match the problem being considered. The questions above are what tell you whether it does.
Try this now
Choose three events that would materially affect your household or business. Write one financial consequence next to each. Then note the document or figure that would help you understand the current protection.
Ask your advisor
- Which financial risks have we planned for, and which assumptions are we using?
Next: Confirmed, estimated, unknown: label every figure
A useful boundary: Identifying a risk does not determine the amount or type of cover that may be suitable. That requires your full circumstances and qualified advice.