Insurance planning is the process of evaluating the risks to your overall financial plan and making decisions about how you will manage them. These risks range in severity from something as minor as a sprained ankle to something as catastrophic as your premature death. These risks also vary in likelihood from high-frequency to low-frequency risks. Your chances of catching a cold and missing a few days of work, for example, are much greater than the chances of you dying in a tragic plane crash. Regardless of the likelihood or possible severity, every risk has the potential to affect your financial plans.
Risks to Your Financial Plan
In the financial planning process, we work with you to identify things that might cause your financial plan to go “off track”. Events such as your premature death for example, can cause extreme financial hardship for your surviving family members. An extended illness can create a burden in the form of large medical bills and a temporary loss of income. In turn, this can create other problems, ranging from stress to extreme economic hardship. A recent university study found that 62% of all personal bankruptcies are filed because of large medical debts. While there is no way to guarantee that events such as these won’t occur, there are steps that you can take to reduce or eliminate the financial hardship that results when these events do occur.
Transferring Risk
One of the most effective ways of managing the impact of risk on your financial plans is to transfer the responsibility for the economic loss to a third-party. This is accomplished using products such as life insurance, health insurance, disability insurance, automobile insurance, and homeowners insurance. By transferring risks that can have a large economic impact on your life to an insurance company, you build security into your financial plans. This security allows you (and your family) to achieve your goals even in the event of a tragic or catastrophic loss.
The Time to Plan in Now
When it comes to insurance planning, there is no time like the present. Once a loss has occurred, whether it is a minor fender bender or something much worse, it is too late. Insurance planning is a large part of the comprehensive planning process, but that doesn’t mean you have to do “comprehensive planning” in order to map out and implement a good insurance and risk management strategy.
For an evaluation of your current insurance program and to discuss your insurance planning needs, please contact us today.
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