Protecting Your Family and Your Wealth with Insurance Planning

Jennifer Means, MBA, CFP®

Aug 17, 2021

Providing your family and loved ones a path to financial success requires looking at variables other than your 401(k) or IRA accounts. It forces you to look at the other pieces making up your financial plan, notably insurance.

Insurance coverage comes in many forms: car, house, life, disability, health, etc. Unfortunately, we often see extremes in insurance coverage and, more often than not, erring toward not having enough. Inadequate insurance coverage can derail your financial future. This can be in the form of not enough liability coverage or not having insurance at all. I have met with many young, working professionals who have life insurance and feel protected in case of an emergency. These are usually married couples that want to safeguard their spouse and children in case of their unforeseen early passing. They purchase life insurance knowing their loss of income would be detrimental to the family.

The Case for Disability Insurance

Surprisingly, this same couple has life insurance but does not have disability insurance. According to the Social Security Administration Trustees Report for 2020, both males and females from age 21 to 67 are more likely to become disabled than kick the bucket. It is startling to know that the likelihood of disability is higher than premature death, however, it is common to see the absence of disability insurance.

Approximately 51 million working adults in the United States do not have disability insurance. Furthermore, the Social Security Administration states, “68% of the private sector workforce has no long-term disability insurance.” These are alarming numbers of people without disability insurance, they are underestimating the likelihood of an event and are therefore not insuring against the risk. While we all hope for a long, healthy life, we know life will hit us with unknowns. According to the Centers for Disease Control and Prevention, one in four adults in the United States has a disability. It is not my intention to alarm you; I do want to make sure you are aware of what the statistics say, help you prepare for the unimaginable and remind you to never take things for granted.    

Adequately insuring yourself means that you’re not solely responsible for the risks of everyday life, you’re sharing that responsibility with an insurance company. We recognize that everyone’s situation is unique with different levels of resources available. Here are some steps I recommend to everyone to help ensure you are prepared:

Simple Steps for you to Start Being Protected

  1. Have thoughtful conversations with your loved ones to determine your insurance needs.
  2. Analyze your current coverage with an insurance professional who works in your best interest. Consider working with an insurance broker as opposed to an insurance agent.
  3. Act sooner rather than later. Do not wait for a significant event to happen to discover the insurance coverage you have in place, or lack thereof, is insufficient.
  4. Talk to your employer to see if life insurance and disability insurance are included in your benefit package. Employer provided coverage may not be adequate, but it is a good place to start and is usually offered at reduced cost.

Typically, we are not thinking about the number of threats we face every day because we’re focused on other, more pertinent and concrete parts of life. However, ignoring the topic does not reduce the risk and could have long-term effects on your financial well-being. Topics like death and disability can be uncomfortable to think or talk about. So, please, give yourself and others the gift of knowing that you are doing everything in your power to be protected against life’s unknowns.

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