by JEFFERSON ADCOCK, PARTNER
Not considering insurance in your financial plan is a common, yet big mistake. And this doesn’t just mean health insurance!
While looking long-term and tuning out the noise is key, so is reviewing your plan on a regular basis, at least once a year, to make sure your long-term goals, and what you’re essentially working toward, are the same.
Think about it: What would happen to your assets if something was to happen to you? To your business partner? To your family members? What if your ability to earn or run your business was impacted? What would happen to your cashflow? What would happen to your financial goals?
Insurance plays a key role in a financial plan because it helps mitigate risks posed to you and your family’s livelihood and financial means. At TrustCore, we believe all financial plans, especially a high net worth financial plan, should include a risk mitigation review. The more you have, the more you stand to lose.
In addition to overlooking insurance completely, another mistake seen as a financial advisor in the Nashville, TN area is not including the right insurance.
Insurance needs fall broadly into the following 4 subcategories.
Life Insurance
Life insurance provides for your dependents in the event of your death. It’s a common misconception that life insurance is only important when you’re older, but unfortunately, unforeseen death can occur at any age.
What would happen if you and your income wasn’t there tomorrow? Would your spouse be able to pay the mortgage, help your children and grandchildren with education, make plans for retirement, live without major disruption? Life insurance can help make sure they can.
Another misunderstanding when it comes to life insurance is that it just supports a spouse, but that’s not always the case. Life insurance policies can also cover your dependents. If you support other family members, make sure you understand their coverage as well.
The amount of life insurance and the type of plan that makes sense for you depends on many factors, such as the age of any dependents and how much of the household income you are responsible for. Discussing your needs with a financial advisor can help make sure your coverage supports your financial life.
Health Insurance
Health insurance today is expensive, and prices continue to rise. Even a minor illness or procedure can add up to thousands of dollars in costs. Medical debt is one of the fastest-growing categories of consumer debt. Simply put, health insurance allows you to have medical care when you need it without undue concern about the costs.
It’s very important not to inadvertently got caught without health insurance and be stuck with hefty bills for needed medical care. If you’re currently insured by employer coverage, for instance, and you change jobs or pivot into retirement, make sure that you will be covered seamlessly as you navigate the transition.
Don’t neglect insurance for vision, hearing and dentistry, either. These sometimes aren’t covered by standard healthcare policies, but can become increasingly important as you age.
Finally, make sure you understand Medicare coverage and your options as you move into retirement. Most people become eligible for Medicare when they turn age 65. You can sign up whether you’re still working or are already retired, because Medicare is linked to age, not job status.
Medicare can be complicated, and it’s a common misconception that Medicare is entirely free. It’s not!
Prescription medication is not covered through standard Medicare coverage. It has to be purchased separately if you want it. Some insurers offer Medicare prescription policies, but you will have to review your options and make a decision. Enrollees of standard Medicare also need to pay deductibles, premiums and co-pays, which can add up if you need major care. You can purchase Medigap insurance plans to help pay these costs, but again, you will have to review and choose what makes sense for you and your situation.
Finally, Medicare does not cover long-term care. It’s prudent to discuss long-term care insurance with a financial advisor.
Disability Insurance
If you work, disability insurance protects you against a loss of the ability to work and earn through illness or incapacitation. Disability insurance can be either short-term or long-term. In either case, it usually pays a percentage of your average earnings.
Short-term disability insurance usually ends when you have recovered sufficiently to return to work. Long-term disability lasts a certain period of time or until you retire.
Many people can get disability insurance through their employer. If not, you can get an individual plan. The cost of a policy usually increases as you age.
Business Risk Insurance
If you run a business, is your company insured against risk?
Often times, business owners are under the assumption that nothing bad will ever happen. While we don’t want you to expect the worse, unexpected issues can arise, so we do want you to be prepared.
Liability insurance, for instance, protects you, should employees or clients be injured by your products or on your premises. Property insurance protects the physical property against loss, damage or theft. Make sure you have appropriate liability and property insurance and review the amounts every year.
Be sure to also review your business operations to determine whether you need more intensive coverage. Do you need to be insured for strategic risk, for instance? Strategic risk protects against changes in the strategic environment, such as a competitor suddenly coming in to the marketplace and doing well. Reputational risk insurance protects against damage to your business’s reputation, such as breaches of customer data security.
The financial advisors at TrustCore are equipped to help you review your business risks and make sure you are sufficiently insured. For more about financial planning for business owners, check out our new guide.
Contact a Financial Advisor
The point of insurance is to mitigate risk posed to your overall goals and financial life. As a result, at TrustCore, we believe insurance needs should be an integral part of the financial planning process, but not everyone’s needs are the same. Talk to a financial advisor about the types of insurance you need, the amount you need and how those needs may change in the future. If you’re not sure where to start, click here.
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