What Protection Do I Need? | AWM Insights #126

It only takes one unfortunate event to bring down everything. That is why risk management is such an important part of protecting your financial structure and sustaining generational wealth. It is not generally given the attention it deserves.

Risk management is more than just insurance. It is protecting against an uncertain future. This includes physical as well as online security. Families should be prepared for these risks and informed on how to deal with situations that hopefully never come up. 

It doesn’t make sense to skip insurance for the things that can devastate your plan when you can insure them relatively cheaply. Home, auto, personal umbrella liability, disability, and life insurance should be dialed in appropriately for each family. 

Life insurance is often sold as something more than just insurance. Sometimes it's touted as a bank or a wealth generation tool, but in general, simple is normally better. These policies are typically the most pushed because the commissions are the highest.     

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EPISODE HIGHLIGHTS:

(1:17) You can build great wealth and create the best investment plan in the world but all it takes is one accident to ruin everything. Unless you have built out your risk management. (2:12) Insurance is just one piece of risk management. The future is uncertain and you should think about how to protect yourself.(2:40) Personal security and protecting yourself online are both forms of risk management. (3:30) How you construct your portfolio, when done right, is a form of risk management.(4:15) Uncertainty is what we should be concerned about as individuals. Risk is what a casino should be worried about.(4:33) Overly leveraging an investment portfolio is a risk that oftentimes blows up in the investor's face. Managing uncertainty should be done at the portfolio level too. (5:10) Partnering with a cybersecurity firm has given us insight into how to protect yourself online.(5:25) Using a password manager is much better than using the notes app or using an easy-to-guess password for all your accounts.(5:42) Public wifi is often a place you are a target. What are called “dirty networks” should be avoided and using your phone as a hotspot is usually safer. (6:06) Athletes are public figures and even if you don’t think of yourself as a target, people may look to target you because of the notoriety.(6:37) If you’re ever being followed, head to a public well-lit place. Being aware and educated on how to handle these situations is a part of risk management.(7:40) Even if these disturbing events don’t happen very often, over a lifetime the chances one of these events will happen to you is significant enough to be prepared early.(8:00) A well-structured risk management plan is not difficult to get in place. It takes time and effort but should be a pillar in a wealthy family.(8:25) Proactive risk management addresses risks before they happen. Insurance, like auto or life insurance, addresses bad things once they’ve already happened.(9:45) Umbrella Liability insurance is notoriously missed by professional athletes. This gap is a massive risk to not just current wealth but also future earnings.   (10:27) Umbrella protects you whether you’re in your car or at home. What if you accidentally hurt someone else?(10:59) What happens If you get sick or injured and your family relies on your income that is now gone? Disability insurance protects your family in this situation. (11:13) You get insurance for insurance. Don’t be fooled. (11:29) Life insurance is often pitched as a wealth generation tool but life insurance is not a bank. If you hear that pitch, turn around and walk away. (12:09) It is incredibly important to have the right life insurance at the right amount to protect or provide for your heirs. (12:59) Where other insurance is usually undersold, life insurance is oversold.(13:25) Simple is better. The cheapest version is generally all you need. It isn’t sold because it pays the insurance agents the least.