Don't Ignore Insurance in your Financial Planning

By: William Forbes

October is National Financial Planning Month – a time to be sure your family finances are organized and you have a plan in place to meet your financial goals. Although it is probably not the first thing that comes to mind, insurance is an important part of your financial plan. The very reason for insurance is to transfer your risk of financial liability to an insurer. To put it more plainly, insurance protects you and your family from a financial loss due to the loss of life or property.

Just as you might sit down with a financial advisor annually, or outline your family budget and savings, you should evaluate your insurance policy each year as part of your financial planning (Click to Tweet!). Below are some items to bear in mind when it comes to considering whether your insurance policy is still an accurate reflection of your needs.

1.       Have you moved or made any significant changes to your home?

Beyond just meeting the minimum requirement of notifying your insurance agent of a change of address, it’s important to discuss with your agent what a new home could mean for your overall financial picture. Are you taking a step up in terms of the mortgage and/or size of the home? Are you the primary earner for your household? Are the coverage amounts still appropriate for the new home, or for your current home after a structural change has been made? In looking at your finances, are the deductibles still appropriate?

The answers to these questions can dictate important financial decisions for you and your family. They also help to bring into focus your full financial picture, and can lead to other important financial decisions. Take, for example, the first two questions: (1) Are you taking a step up in terms of the mortgage? (2) Are you the primary earner for your household? If you’ve answered yes to both of these, then it may be important for you to look at your life-insurance coverages, in addition to your homeowner’s policy.

It’s not just about reporting new purchases and changes in your living arrangements to your agent to be sure they are covered (though that's certainly part of it); it’s also critical to understand what these changes mean to you and your family’s overall financial health.

2.       Have you had a major life event – marriage, a new child, health changes?

If you’ve recently had a major life event, it’s probably a good time to see if you have the right insurance policies in place for those who depend on you (Click to Tweet!). There are many different life-insurance products on the market, which address a variety of financial needs and time horizons.

Maybe just as important as life insurance, is disability insurance. While most Americans depend on company-sponsored disability programs for issues that keep someone from working, often these programs do not sufficiently cover income loss. Particularly in a one-income family, replacing the breadwinner’s earnings is crucial to the family’s financial well being.

Your agent can walk you through the different products out there and which would be most affordable and beneficial for your family.

3.       Are you planning any large purchases in the coming year – a car, boat, art?

This question is similar in nature to item number one. First, it’s important to discuss these types of purchases to be sure you have the correct insurance products and coverages in place. But, it’s also important to understand how large purchases affect your entire financial picture. As your lifestyle changes, it’s essential to have the proper insurance in place to protect you and your family, and to be sure your loved ones can maintain the lifestyle in the unfortunate event that something happens to you.

4.       Have you had any business changes?

Are you changing your job or company? Are you planning to be self-employed? Are you nearing retirement? These types of business-related changes not only affect your finances, but also affect the types of insurance you should carry. Whether you are getting insurance through a company, or are purchasing a policy individually, you should understand the policy’s coverages and limits. There are so many things to consider in terms of insurance, when it comes to a change of employment. I couldn’t possibly cover everything here. However, I wanted to include this item as a reminder that if you will be making career changes, set a meeting with your agent to discuss your plans and how to address your insurance needs smartly. (Click to Tweet!)

5.       Do you need to consider long-term health care for yourself or a loved one?

Long-term health care policies pay daily benefits to help offset the cost of nursing and home care for certain illnesses not normally covered by health insurance and Medicare.  It’s hard to think about, but for my insureds over the age of 50 (or those with an elderly relative), I recommend understanding what this type of policy can offer you and your family. A long-term health policy could provide money to help pay for skilled care of a loved one, including: (1) respite care, (2) home care, and (3) adult day care. Keeping up with the costs of nursing care can be financially crippling, but there are insurance products that can help.

6.       Are you planning to travel more?

If you are planning on jet setting, whether you have dependents or not, talk to your agent about what insurance products could be helpful in your travels. From travel health insurance to cover injuries or illness while you are on the road, to rental car coverage, to property insurance to cover your valuables, there are lots of options your agent can offer you. All of these options can impact your finances, should you experience a loss while traveling.