Insurance Needs and Your Financial Plan
Man Plans, God Laughs! Planning for the Unexpected
The best laid plans can easily be derailed by unexpected calamities. A spouse suddenly finds herself widowed (with kids to put through college). Cancer or accident leaves a breadwinner unable to work. Retirement plans upended by a diagnosis of early onset Alzheimers. A sound financial plan considers what obstacles may keep you from achieving your goals, and recommends a strategy to mitigate that risk.
Insurance needs change over time. Life insurance that was crucial earlier in your life may be less important as you near retirement. Long term care needs and end of life medical expense may not be a concern when you are 40, but is surely on your mind as you approach retirement.
As part of your overall financial plan, we will review your current coverages and recommend changes as appropriate. Often we can find less expensive ways to insure against a given risk. Or we may identify policies you really don't need anymore. As fee only financial advisors, we don't sell insurance. Instead, if we feel you are underinsured, we may be able to recommend you to a trusted resource who can help you obtain the coverage you need.
Life Insurance and Your Financial Plan
I have several clients who had their retirement and financial plans derailed by the unexpected death of a spouse. While each was tragic, in every case the deceased spouse had sufficient life insurance coverage that their surviving spouse did not have to worry about their financial future.
While most people understand the general need for life insurance, actually figuring out how much and what kind to purchase can be very complicated. Getting good unbiased advice is very difficult. Insurance agents are paid based on the size of the premium on the policy you pay. They are motivated to sell you the most expensive policy possible - whether or not that policy is best suited to your overall plan.
Insurance needs change over time. We will analyze your current need, review your existing policies, and recommend changes to improve coverage and/or save you money. As fee only financial planners, we won't benefit financially based on the recommendations we make, so our advice will always be based solely on your needs.
Long Term Care Planning
Perhaps one of the biggest financial risks we all face is the risk of high long term care costs. It is not something anyone likes to think about. But the financial risks are real. And no, your Smith and Wesson is not a viable long term care plan. (can't tell you how often I hear that one...)
Unlike most retiree health care costs, Medicare does not pay for most long term care costs, either in home or in a nursing home. Medicaid is the government program which helps some pay for these costs, but to qualify you need to spend all of your financial resources. We don't think going broke is a sound financial plan!
Insurance can be an option and advisable for some, but it is terribly expensive. Continuing care communities (independent living / assisted living) offer an alternative for many.
Your financial plan will analyze your ability to cover costs out of pocket. For those facing a likelihood of high costs in the near future, legal advice may be required to help protect assets and ensure financial security for a healthy spouse. Planning ahead is important. If you wait until the need is imminent, it may be too late for effective planning.
Disability Insurance
Your ability to earn a living is likely your most valuable financial asset. That asset can be severely impaired in the event a chronic illness or accident prevents you from being able to work. Many people have disability insurance policies through their employers - but few really understand what coverage they have, or if it is sufficient to provide for themselves and their loved ones in the event it is needed.
It is curious that people pay so much more attention to their life insurance than their disability coverage. Statistics indicate that an individual is far more likely to suffer a long term disability than death during their working career.
We can review your employee benefits for you and explain how your disability benefit would work. If additional coverage is needed, we can recommend purchase of a supplemental policy.
Auto and Home Insurance
Don't ignore your home and auto policies. Premium creep over time can result in your policy becoming much more expensive than those offered by competing companies. Inflation or automatic adjustment features in your policy might mean you are either over insured or underinsured. You don't want to wait for an accident to happen or disaster to strike to find that your insurance coverage is insufficient.
Although it is not a standard element of our financial planning review, we will arrange for a review of your personal lines (auto, home, umbrella) insurance upon request. We will work with a trusteed independent agent, then go over the results with you to help you decide whether changes to your current insurance are warranted.