You need to honestly assess the full array of unfortunate events that could occur.
Is the risk of tornado damage to your home something to factor in when doing financial planning? How about the chance that you could become chronically ill or disabled — temporarily or permanently — and be unable to work?
In the throes of financial planning, it’s not unusual for people to forget about the many different types of insurance that can protect you now and be purchased relatively inexpensively today for the issues you may face tomorrow.
When you think about it, buying insurance really is about protecting your assets. That’s because when an illness or accident or other emergency occurs, it’s usually very expensive — unless you have the right insurance coverage.
Let me suggest a step-by-step approach to bringing it into your financial planning scenario. For both steps, it can be extremely helpful to consult with a professional financial adviser.
Check current coverage: To get started, you have to assess what is important to you. Your home? Your business? Excellent health care? While it’s not a fun activity, you also need to honestly assess the full array of unfortunate events that could happen to you and the things and people you care about.
Finally, you take those lists and look at what types of pertinent insurance you have and the coverage level for each.
Questions to get you started with the assessment process:
Do you own a business? If yes, what is your life insurance coverage?
Do you have short-term disability insurance? Long-term disability insurance?
Will your employment-based health insurance end or provide lower benefits after retirement? If yes, how much will you pay for health care expenses not covered by Medicare?
Do you have a Health Savings Account (HSA)?
Do you have long-term care insurance?
How much money have you set aside to cover funeral expenses?
Do you have property and casualty insurance to adequately protect your assets from a loss from a storm, fire or flood? What is the level of that coverage?
If you have substantial assets, do you have an umbrella policy to protect them, in case you are sued or incur substantial legal fees?
Yes, it is a hefty list of questions. However, thoroughly answering them is one of the most valuable things you can do to help secure your financial future.
Add needed coverage: The second step is to determine the right insurance products and coverage amounts to meet your needs, and to get that coverage in place.
After thorough assessments, life insurance and supplemental Medigap health insurance tend to rise to the top of many people’s priority lists.
Life insurance can provide income to your family or business if you die, and it offers tax advantages. The amount and type of life insurance you need depends upon your income, retirement accounts and investments in relation to your family’s future expenses and things like funeral expenses, probate, legal costs and estate taxes.
Many people need supplemental health insurance because their employer-sponsored coverage shrinks or ends when they retire. Medicare kicks in at age 65, but it does not cover all the costs of physician visits, nursing and routine care.
Other common needs are for a Health Savings Account, which is tax-free and similar to an IRA for your medical expenses, as well as long-term care insurance and disability insurance.
The bottom line is that insurance is an important pillar of a truly comprehensive plan for your future, for your retirement and for your family and beneficiaries. It deserves as much attention as any other aspect of your financial planning. Don’t delay — it’s wise to plan ahead for the certainty of uncertainty.
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