THE IMPORTANCE OF INSURANCE: A KEY ELEMENT FOR A SUCCESSFUL FINANCIAL PLAN

A well-rounded financial plan goes beyond just investments and savings; it also includes the right insurance coverage. Insurance helps protect you and your loved ones from unexpected financial burdens, which can derail even the best-laid plans. Ensuring you have the appropriate property and casualty (home owners and auto), health, life, and long-term care insurance coverage is essential for your financial security. Insurance takes into account your goals and current financial situation and should evolve as your life changes.

Due to the many and complex options available in the marketplace which are often presented in an attractive packaging, the vital nature and purpose of insurance can be eclipsed. Insurance helps individuals and families shield from the unpredictable and inevitable challenges of life. It plays a protective role, which is oftentimes contrasted by the many options commercialized and sold by banks, which frequently blur the lines between investment and insurance under the guise of enhanced benefits.

The fundamental purpose of true insurance products (life, accident and health, property and casualty, disability, long-term care insurance) is to provide financial security, not to generate additional wealth, while preserving your current quality of life. The main principle of insurance is to mitigate the financial impact of adverse events that could dramatically alter yours and your family’s life.

It is vital to be aware of the difference between insurance and investment products. ?The purpose of investment products is to grow wealth with an acceptance of risk; on the other hand, the purpose of genuine insurance is to protect against risk. Insurance helps with continuity when faced with disruptions, which may be caused by either the death of the family’s breadwinner, illness, a disabling accident, etc.

Selecting the right insurance coverage and the proper amount is essential for a solid and strong financial strategy to protect the wellbeing of you and your family.

One client I worked with, a couple in their 40s, realized how important it was to secure life and long-term care insurance as they prepared for their future. After discussing their goals, we customized a coverage plan that protected their assets while ensuring they wouldn’t face financial strain in the event of illness or an accident.

• Types of Insurance Coverage to Consider:?

1. Property and Casualty Insurance: This type of insurance protects your home, vehicles, and other assets from damages or liabilities. Whether it is a car accident or home repair, having adequate coverage can prevent large, unexpected expenses from disrupting your finances.

2. Accident, Health and Disability Insurance: They protect your quality of life and financial independence in case of severe illness or injury. These types of insurance are important as they cover medical bills, provide income when you are unable to work and help maintain your standard of living.

Medical emergencies can lead to significant expenses. Appropriate accident, health and disability insurance coverage ensures that you and your family have access to quality healthcare without draining your savings.

Disability insurance is often times overlooked. Work-related injuries and illnesses certainly occur; however, they are usually not the most common reasons people become disabled.?

Disability insurance can provide between 40% and 70% of income replacement once you pass the waiting period. Group disability insurance or individual coverage outside of work may offer more coverage than Social Security benefits, it is important to mention that Social Security disability insurance is very difficult to qualify for.

Without disability insurance as part of your financial planning strategy, a long-term disability would most likely exhaust all the lifetime savings you worked so hard for, causing your financial plan to fail.?

3. Life Insurance: Provides financial protection to your family if something happens to you. There are various types of Life Insurance coverage; however, the choice of insurance policies depends entirely on your needs. You need to assess the financial risks that you face and buy suitable plans to insure such risks, your insurance agent should be able to do an analysis and help you determine the appropriate amount of coverage. It is important to periodically review the amount of coverage you have is still appropriate as your life needs and circumstances change.

One of my clients in her 30s, is a single mom with two young children.? She was concerned about her family’s future. We designed a life and disability insurance plan that would ensure her children would be taken care of financially if anything happened to her.

4. Long-Term Care Insurance: As people live longer, the need for long-term care, such as assisted living or nursing home services, has become more common.

According to the Department of Health & Human Services, it is estimated that adults turning 65 have a 70% probability of long-term care needs during the rest of their lifetime, with the average need for males being 2.5 years of long-term care (LTC) services and an average of 3.6 years of services for women. The average cost in today’s dollars for a 65-year-old needing long-term care in the future is approximately $120,900. Without long-term care insurance, these costs can significantly impact your retirement savings.

• How to choose the right Insurance Coverage?

In order to select the right type of insurance, it is necessary to assess your personal situation and understand the different products available.? The following tips can help you make the process easier:

1.??? Assess Your Needs: Determine what you need to protect. Is it your family's future, your income or both?

2.??? Understand The Terms: Read the fine print. Know what is covered and what is not. Pay special attention to any exclusions.

3.??? Compare Products: Not all insurance products are created equally. Compare different policies to find the one that best suits your needs without unnecessary extras that inflate costs.

4.??? Consult an Independent Advisor: An independent advisor can offer unbiased advice without being tied to specific products or sales targets. When done properly, your Insurance Agent/Broker should do a comprehensive analysis to determine the appropriate amount of coverage.

As a Certified Financial Planner? (CFP?) professional and Insurance Broker (Life, Accident, Health, Disability, Long-Term Care), I help clients obtain the proper coverage and integrate insurance into their broader financial plans, ensuring their assets and loved ones are protected and they are not either overpaying for coverage or underinsured. ?Having the right coverage can keep your financial plan intact through life’s unexpected challenges, giving you confidence in your financial future.

Make sure you review your insurance coverage at least once per year to make sure it is still appropriate. Your insurance coverage should be adjusted as your life and circumstances change.?

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[Advisory Disclosure]

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions.

Nothing contained herein is to be considered a solicitation, research material, an investment recommendation or advice of any kind. The information contained herein may contain information that is subject to change without notice.? Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor.

Risk tolerance is an investor’s general ability to withstand risk inherent in investing. There is no guarantee a recommended portfolio will accurately reflect your tolerance to risk.

Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market.? They are methods used to help manage investment risk.

?Investing involves risks, including the loss of principal.? There is no guarantee that your investment will be profitable.? Past performance is not a guide to future performance.? The value of investments, as well any investment income, is not guaranteed and can fluctuate based on market conditions.?

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