Why is insurance so important in financial planning?
When planning your finances and future, it is important to consider ways to strengthen and secure your financial plans. One way of doing this is by ensuring you are prepared for the unexpected by having an insurance policy that will support and work alongside any emergency funds you may have. In the unlikely event something bad happens to you, whether you become sick, or get in an accident, it is important to have insurance coverage as emergencies can be expensive. Financial planners therefore recommend having insurance, so that you do not need to use your invested money or money set aside for retirement in the event something happens. According to the Insurance Information Institute, only 54% of Americans have life insurance, which is very surprising given the benefits insurance offers.
Risk Mitigation and Building a Safety Net
Having insurance will ensure that your financial plan is not altered by a significant amount in case something happens to you. This allows you to create a safety net around your finances.
Peace of Mind and Preservation of Wealth
By buying insurance, the stress of emergencies on your finances will be alleviated. Thus, you will have peace of mind knowing that your savings are not threatened, and that your accumulated wealth can be preserved.
Protect Yourself Using Various Plans
As you can buy various types of insurance, you can mitigate risk in a multitude of areas. Investing in various types of insurance, such as life insurance, health insurance or even auto insurance can help you cover yourself across the board. By buying several types of insurance, you can create a thick layer of financial protection around yourself.
Types of Insurance
The various types of insurance policies available are:
Term Life Insurance – Guarantees payment of a stated death benefit if the covered person dies during a specified term
Auto Insurance - Protects you against financial loss in the event of a car accident or car theft
Homeowners/ Renters Insurance - Helps protect your house and items held within both private residences and rented homes
Health Insurance - Helps you pay for medical services and sometimes prescription drugs
Long-Term Disability Insurance - Protects you from losing your income if you’re unable to work for a long stretch of time because of an illness or injury
Long-Term Care Insurance - Helps cover costs related to a nursing home stay, assisted living facility, or caretakers coming to your house when someone gets older or starts dealing with health issues
Identity Theft Protection - Reimburses you for expenses incurred to resolve problems related to identity theft
Umbrella Policy - Provides coverage for lawsuits and large claims that aren’t covered by your other insurance policies
Work with your financial planner to decide when the right time to purchase insurance is, and to find the best policy for you!