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Why Insurance is an Important Part of Your Financial Plan

Why Insurance is an Important Part of Your Financial Plan

March 09, 2020
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When people think of financial planning, they usually think investing. While investing is certainly a part of a financial plan, it is hardly the only component. One area that is often overlooked is protection, or risk management, or to use a less palatable word…insurance. In this blog post, we’re going to cover why insurance is an important part of your financial plan and what types of policies might be right for you. If you have even the slightest question about your current insurance coverage, we are ready to help you make sense of it. 

Contact us to schedule a no cost insurance review with Good Life Financial Advisors of NOVA! 

Our Philosophy

Good Life Financial Advisors of NOVA take a three question approach to financial planning:

  1. Will I make it?
  2. What are my blind spots?
  3. What is my “it?” (What is important to me?)

Insurance is often a huge blind spot—in essence, what you don’t know can hurt you if you don’t have a plan in place. When you work with us, we’ll help to find what policies are right for you and assess your current coverage. We’ll also help you pursue your long-term financial goals to help you “make it,” and we’ll work with you to sort through what is most important to you financially to create a plan that meets your needs.

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Why You Need Insurance 

Insurance is important for protecting yourself, your assets, and your loved ones, but is often not as valued as other parts of a financial plan. The goal of a financial plan is to create a roadmap that helps you meet your goals, and this roadmap is incomplete if it doesn’t consider the possibility of setbacks occurring. Insurance can help keep the rest of your financial plan on track when these unexpected setbacks occur. Insurance can also limit stress for you and your loved ones. For example, many people put off getting life insurance. While this is completely understandable, knowing that your family will be taken care of if anything were to happen to you can make you feel more secure. 

When You Need Insurance

With some types of insurance, such as car insurance or homeowner’s insurance, it’s obvious when you should purchase a policy—when you purchase a car or home. But when you should purchase some other types of insurance is often less clear. Everyone should have health insurance, and if you work, you should also have some form of disability insurance. If you’re getting married or having a child, now is the time to look into getting life insurance. If you’re in your late fifties or early sixties, now is usually a good time to look into getting long-term care insurance. This is also a time to review your existing life insurance, and see if it is still something you need.  Finally, once you have over $1 million, you should look into getting liability insurance, which can help protect you in case a lawsuit is ever filed against you.  

Which Policies Are Right for You? 

Having insurance is not the same thing as having the right insurance. Insurance may be complicated, but it’s worth taking the time to ensure you have a policy that meets your needs. Since everyone’s needs are different, which insurance you need and what exactly that policy should cover will vary from person to person. Working with a professional that’s knowledgeable about insurance can help you find the right policy. Though you should discuss all insurance policies with your financial advisor, there are four types of insurance that you should be aware of: life insurance, long-term care insurance, disability insurance, and property & casualty insurance. 

Contact us to schedule a no cost insurance review with Good Life Financial Advisors of NOVA! 

Life Insurance

Finding the right insurance policy isn’t always easy, but it’s important for making sure your loved ones are taken care of. There are a few expenses that life insurance can help cover, and one of the most important of these is a mortgage. If you have a mortgage, this is one of your largest expenses. Permanently losing the income from one spouse may leave the remaining spouse struggling to make mortgage payments. A lump sum received upon death can be invested in a way to generate income so the surviving spouse can continue to make the mortgage payments, or perhaps pay off the house.  

Funeral costs and other final expenses are another major expense that a lump sum could help cover. If you have aging parents or a special needs child, a life insurance policy can also help ensure their continued care. Finally, you may also be able to factor higher education expenses into the death benefits of your life insurance policy.  

The bottom line, life insurance can give your loved ones financial security and choices in the event of your death. 

Long-Term Care Insurance

Medicare and even Medigap don’t cover most of the costs associated with long-term care. While the costs associated with long-term care vary drastically, it is not uncommon for out of pocket expenses to end up being hundreds of thousands of dollars. Proper long-term care insurance can help keep you from spending a huge portion of your retirement savings on healthcare costs.  

Disability Insurance

If an employee is injured and is no longer able to continue working, disability insurance will provide them an income. There are two basic types of disability insurance: short-term and long-term disability insurance. 

Short-term disability applies to those unable to work between three to six months. This is dependent on the policy’s Maximum Benefit Period, which can vary. Long-term disability insurance applies to those unable to work for over six months. In both cases, only a portion of the worker’s salary is provided. 

If you own a business, it is likely that you have—or certainly need—disability insurance to ensure the welfare of your employees. 

Property & Casualty Insurance

It is also a good idea to review your property & casualty insurance limits from time to time. Property & casualty insurance, as it relates to owning a home, will cover loss of your belongings. If you have not reassessed your assets and their coverage, it is important to do so to ensure they are protected.  You also should review your auto policy to ensure your liability coverage is enough to cover a significant accident.

Contact us to schedule a no cost insurance review with Good Life Financial Advisors of NOVA! 

Review Periodically

Just like any other part of your financial plan, you’ll want to periodically review your insurance policies to ensure you still have the coverage you need. As your life changes, so will your insurance needs. Annually or after major life events, you should review your policies to make sure your current level of coverage is still appropriate.  

Work with a Professional

Even those who feel confident in other areas of their finances may find insurance a confusing topic. As long as you know why insurance is an important part of your financial plan, you can find the right financial advisor to assist you in creating a plan that works for you. Contact us to schedule a no cost insurance review with Good Life Financial Advisors of NOVA!

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