Personal Risk Management and How It Improves Loss Resilience

Stage One—Prepare and Plan

Planning and preparation are the focal point at the beginning of the personal risk management process. This is the foundation of your risk management plan and, therefore, will take some time and energy to put in place. Here are some of the key ingredients in a comprehensive personal risk management plan.

Conduct a risk assessment and insurance analysis. During a risk assessment, the adviser should not only discuss the obvious risks like homes, valuable collections, and cars but also inquire about other areas of risk that may not be as obvious. Some examples include domestic employees, serving on a nonprofit board, traveling for business and/or pleasure, entertaining at home, renting boats and other vehicles through the Internet, and many other types of activities that carry risk. Most importantly, the insurance adviser should take time to discuss liability exposures and offer counsel regarding excess liability.

Work with an insurance adviser who also offers personal risk management services. These professionals typically identify themselves as personal risk managers or advisers and may have the following specialty designations. These designations are an indication that the individuals who hold them have undergone rigorous training in the specialty of personal risk management.

• Certified Advisor of Personal Insurance (CAPI)
• Certified Personal Risk and Insurance Advisor (CPRIA)
• Certified Personal Risk Manager (CPRM)

Prepare an inventory. Include the contents in your home, including art, jewelry, and other valuable items. Here is a tool that can be used to assist with this process: HomeZada.

Prepare an emergency contacts list. This is a list of contact information for family members, emergency services, doctors, etc., that may be needed in an emergency. It should be physically printed so that it is available if technology is not working.

Develop an emergency evacuation plan and share it with family members. This is an effort to streamline the process of home evacuation in the event of an emergency. It should identify important documents and belongings that need to be taken in a rush situation to enable a quicker recovery after a devastating loss. Families should conduct practice runs of the evacuation plan and have a target completion time of 15 minutes or less.

Create a family constitution. This is a document created by family members to identify values, responsibilities, and rules that the family wishes to operate under. It will help guide decision-making and provide a common starting point for discussing important family matters.

Stage Two—Predict and Prevent

This is the process of utilizing technology and/or practical solutions to identify risks before they become major issues. Some solutions can automatically intervene in the midst of a situation to prevent a major loss. Here are some examples of strategies that are being utilized to predict and prevent losses.

Install automatic water shutoff valves. This device monitors the water in a home's plumbing system and will shut the water off by automatically turning a valve if it detects a leak.

Purchase a standby backup generator. This will provide an alternative power source if power is interrupted from its normal source.

Install hurricane rated opening protection. This will ensure a home that is exposed to hurricanes can withstand high winds and flying projectiles in its most vulnerable areas, the windows and doors.

Utilize a virtual private network. This solution will provide a secure way of utilizing the Internet to prevent criminal hackers from gaining access to your personal information.

Do not text while driving. Sometimes a simple risk-based decision to avoid potential harmful behaviors can be the best way to avoid a loss. Avoiding texting while driving is an easy decision to make and will significantly reduce the likelihood of an auto accident due to distracted driving.

Review contracts carefully. Contracts are written to benefit the person or business who created them. This means that it is critical to read through them to understand exactly what is involved prior to signing. An example of a situation where a thorough contract review would have protected an insured is when signing a contract for a construction project at home. Some contracts include a "waiver of subrogation" clause. This clause prevents an insurance company from being reimbursed for damages caused by the contractor. Another example occurs when hosting an event and a caterer is hired. The caterer's contract may include a provision that places liability for food poisoning on the host versus including it in their coverage. Taking the time to review each section of a contract will help you prevent losses that you have to pay for. This is also an area where an insurance adviser may be able to help.

Stage Three—Respond and Recover

After a loss, there are many details to consider and decisions to be made. Most people are not familiar with how to handle a loss situation since it is not something that happens often. Some aspects of a loss to consider include the following.

• Whom do I contact in an emergency?
• What was the cause of the loss?
• What is the extent of the damage?
• Is there insurance in place for this loss?
• What is the cost of repairs?
• Who will assist with the mitigation and cleanup?
• Who will assist with the repairs or reconstruction?
• How long with the repairs take?
• What will replace that need in the interim (e.g., rental car, substitute housing)?

Even a little bit of planning and research into these questions ahead of time can improve the response time and recovery period in a loss situation. Insurance advisers who offer risk management capabilities will also be able to assist with some of these questions after a loss. For example, they might be able to recommend a disaster-mitigation company to help with cleanup after a fire or coordinate with a rental car company to provide substitute transportation while a damaged car is being repaired. The goal of having a response and recovery plan in place is to reduce the amount of time it takes to get back to the way life was prior to the loss.