.jpg)
Risk is the probability or threat of damage, injury, liability, loss, or any other unwanted occurrence caused by external or internal forces, that may be addressed through preventative action. As consumers, we purchase insurance to protect against the things we fear. Any time you can mitigate risk with a check, you’ve made a good investment.
Over your lifetime, you will experience volatile and unpredictable economic climates. It’s more important than ever to make sure your practice and personal assets are properly protected.
While you can’t eliminate risk, you can prepare for and manage it.
Understand the different types of risk, tradeoffs regarding risk, and how to put a price tag on each risk. Your advisors’ role is to create a cost/benefit analysis of each potential risk.
There are two risk categories:
• High cost/low probability risks that aren’t likely to happen, but could be devastating if they do occur. Examples include hurricanes and earthquakes.
• Low cost/high probability risks are likely to occur but will probably not be devastating if they do, such as a sickness requiring a doctor visit or a short-term disability.
People often buy insurance if they have experienced loss or damage either personally or through another person. Risk management insurance will probably be your largest single expense. It covers dying too soon, living too long, living with a disability, getting sued, losing something valuable, and income tax leakage.
Which risk management mistake will have the least impact on you and your family? After all, the purpose of risk management is to prevent an accident from wrecking your life.
Identify the right strategies and solutions to effectively manage the various risks that arise at all phases of life. Risk management is a sign of maturity, boldness, conviction, bravery, and love for family. One catastrophic event can destroy a lifetime of planning. Being able to afford risk and choosing to take on risk are very different things.
There are many risks in life; how many do you want to self-insure?Balance premiums against the cost of catastrophic damage? Allocate and budget premium dollars to mitigate these risks? Reposition premium dollars as your risks increase and decrease over time?
Self-Insured, Partially Insured, Fully-Insured
In a self-insured situation, you have no insurance. You are prepared to absorb all risks as they occur and will fund that loss with your personal dollars. When self-insuring, the cost of being wrong greatly exceeds the cost of being right.
In a fully insured situation, you have insurance protection for every risk with the lowest copay and lowest deductible.
In a partially insured situation, you choose what you want and don’t want to insure. You control your risk by determining how much risk you will keep and how much you will transfer to the insurance company.
Insurance protection comes from different companies offering policies with different designs, definitions, tradeoffs, and strengths. Address risk by determining how much coverage you need, how long you want coverage for, what you want to accomplish, and what happens if you want the coverage to go longer.
Address potential risks with your trustworthy advisors team. Specifically, there are four types of risks that may affect you and your medical practice:
Risk Management and Premature Death Quantify the financial impact on your family, if your income is not guaranteed to continue when you die.
Risk Management and Family Health Issues Unexpected health issues can affect a family physically, financially and emotionally. Assuming that you will always be able to work and to continue to earn your income has risk.
Risk Management and Foregoing Malpractice Coverage (“Going Bare”) Asset protection is a combination of techniques and strategies designed to protect your personal assets from lawsuits, civil claims, and bankruptcy proceedings. There are many strategies for protecting assets from creditors. Understand the protections available and whether they are Federal, State, Case law-based, or ERISA protected.
Risk Management and Healthcare Compliance Federal or State Compliance: it makes a difference. HIPAA privacy/security rules compliance, High-tech compliance, (PCI) Payment Card Industry compliance, (MID) Data Security Standard, any merchant who has a Merchant ID, (PHI) Personal Health Information, (PII) Personal Identifiable Information, (BA) Business Associate expanded definition, (BAA) business associate agreements expanded definition, fines, penalties, jail time, Anti-Referral and Stark Anti-Referral and Anti-kickback compliance, Florida Board of Medicine rules and Medicare/Medicaid/Commercial payer requirements. With so many standards and guidelines, what’s the risk that you’ll be found non-compliant?
There are several risk management tools or insurance that you can purchase to safeguard you, your assets and your family.
Disability Insurance protects you if you become disabled and can’t work.
Group: Offered by employers
Individual: Purchased on your own
Life Insurance protects your family if you pass away.
Group: Offered by employers
Individual: Purchased on your own
Long-term Care Insurance protects you if you can’t take care of yourself.
Group: Offered by employers
Individual: Purchased on your own
Malpractice Insurance if you get sued for a medical related recommendation or procedure.
Group: Offered by employers
Individual: Purchased on your own
The Role of Trusts in Risk Management
Finally, there are two basic types of trusts you can purchase to offset any risk:
1) Revocable: The trust terms can be changed and part of your taxable estate.
2) Irrevocable: The trust terms cannot be changed and is not part of your taxable estate.
When life insurance policies are put in irrevocable trusts, you can’t change the terms of the trust after it is finalized. A trustee administers the trust and sets up a trust checking account to make payments and distributions. The purpose of this type of trust is usually to transfer assets for estate planning purposes. This type of trust is used often for life insurance policies so that the beneficiaries can receive the proceeds free of estate taxes.
A revocable trust is used to place an asset in trust for someone while maintaining control and the right to take back that asset or give it to someone else. Since the owner of the asset is still in control of it, that asset remains part of the owner’s estate for estate tax considerations.
