Financial planning in life includes a few significant contributing factors, one of which is insurance. There are major considerations in order to gauge the various avenues of insurance and make them an effective staple in the process of planning for financial security.
In fact, in many regards, insurance is a crucial entity of any solid financial plan. Various types of insurance work to protect individuals and their family against cost associated with illness, accidents, death and disabilities.
When considering or devising a financial plan, most tend to think of retirement, savings, 401k and other income generating modes, but it’s important to realize that insurance can help to save money, which is equally as important in a good financial plan.
Identify Your Insurance Needs
This step creates the largest amount of chaos for most people because the value and specifics of insurance can be extremely complex and somewhat difficult to comprehend. Decisions regarding insurance types should be made based on your economic status, family needs and age.
There are various forms of insurance coverage and not one of them is designed as a catch-all. Consider for example, life insurance. This is primarily a necessity, especially for families, while disability insurance is viewed the same because it is useful in the event the insured becomes unable to draw their regular income due to physical or medical disabilities.
These are important insurance types that help when and if these situations occur. Death is certain and the need to cover expenses is less of a financial burden when the insurance is available and present in a financial plan.
The inability to work can wreak havoc in life if regular income ceases and disability insurance isn’t available. When creating a financial plan, it is essential to consider all modes of insurance, as almost everyone will need some caliber of these insurance types at some point in life.
Be careful when shopping for auto insurance but don’t buy less than you need. This coverage provides much needed protection for your vehicle investment, as well as liability for injury or possible damage you or someone driving your automobile may cause.
It also assists in covering expenses you or passengers in your vehicle may acquire due to accidents with uninsured motorists. Most states have mandatory liability insurance laws in place, which helps but isn’t always enough. The numbers vary based on the individual circumstances, but choosing the right coverage with the right deductible is the best way to decrease out-of-pocket costs.
Homeowners & Renters Insurance
This genre of insurance permits the insured to reconstruct and refurnish their residence following a catastrophe. It also aides in the costs of any lawsuits filed due to someone being injured or hurt on the property.
Coverage amount of at least 80% of the replacement value of the home, excluding the land and foundation valuation, is necessary to qualify for coverage of the cost of repairs. Primarily, homeowner’s insurance covers between 50% and 75% of the insurance amount towards the contents of the home. The amount will vary according to your needs and current circumstances.
How often have you heard of a friend or loved one becoming unable to work unexpectedly? Perhaps it has happened to you. This is one of the most important and beneficial types of insurance coverage a person can have, and it contributes greatly to the financial planning spectrum. It provides income protections if something happens and you can no longer work.
Once long-term disability policy is engaged, it replaces a fraction of lose wages, when you can no longer work for a long period of time. Generally, employees cover about 40% of all employees with some type of disability insurance at the cost of the company. If you purchase one independently, you could be responsible for up to forty-cents per $100 of the payments required monthly.
When purchasing disability coverage, seek one that can’t be cancelled and offers life-time benefits, or at least until you turn 65, with salary coverage premiums for the maximum affordable amount. The decision to purchase disability insurance is one that prevents you from having to dip into your savings in the event you experience a loss of income due to a disability.
Long-Term Care Insurance
This coverage appeals to the need of long-term coverage and reminds you to not depend on government sponsored programs to cover the rising cost of nursing homes and at-home care. Very little of the cost for these services are covered by Medicare, and then income restrictions apply.
These programs are consistently being changed and debated by congress and are subject to change at any time. Therefore, long-term care policies play a significant role in financial planning for the future. Medicare supplement policies can assist in covering those charges that Medicare doesn’t and prevent the policy holder from being held responsible for out-of-pocket cost.
A large majority of people are fortunate enough to benefit from health insurance provided by the employer, of which the employer pays a part or all the premium amounts. Employees are often presented with the option of HMO or traditional fee-for-service treatments.
HMO rates are typically less expensive but they come with more restrictions also. Private health insurance costs considerably more than HMOs, hundreds of dollars more in many cases – based on coverage selections, location and deductibles.
This is the elephant in the family that no one likes to acknowledge because it reminds them that life insurance will one day be needed to cover the costs of burying a love one, as well as the debts they leave behind. When put into perspective, living without life insurance, typically costs you in more ways than one.
The financial burden left behind can cause family members to exhaust savings, cash-in retirements and ruin any trace of financial stability just to take care of those debts left behind by the deceased. The amount of life insurance coverage you decide to get depends on existing situations.
If you have a generous income with a large monthly mortgage and kids preparing for college, you will need a relatively large life insurance policy. The idea of planning for a secure financial future without life-insurance is useless because every plan you make can be derailed once your life ends and there is no coverage to pay for existing financial responsibilities.
Various insurance categories contribute significantly to a sound financial planning portfolio. These policies work to ensure that the plan to save financially, is not suddenly disrupted or destroyed by simple or extraordinary life events. Whereas, planning without these policies could ultimately destroy any security financial planning may bring.
About The Author
Alex Wender is the agency owner of Blue Wave Insurance Services. Every day, he works with people all over the United States, helping them understand their Medicare options, and ensuring they are receiving the best service, pricing and resources. Alex is a licensed insurance agent in over 36 states.