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Insurance is a tough subject, because it requires that we face the possibility of a horrible loss, be it through death, disability, or costs associated with long-term care. As hard as it is to think about such outcomes, we must face the facts that accidents occur, and such events are accompanied with added financial losses. Only time and the comfort of family and friends can heal the emotional scars. Financial matters can be managed via a risk management strategy that includes insurance products.

What are the Benefits of an Insurance Strategy?

The primary benefit of a properly executed insurance strategy is peace of mind and financial security associated with the transfer of risk. Your financial future is no longer at risk to devastating events. In the event that the insurance is not called upon until very late in life, certain financial products can still offer financial benefits to the policy owner and the policy’s beneficiaries. Among these secondary benefits are strategies involving the cash value of life insurance policies; certain living benefits associated with insured products; and the use of insurance policies in estate planning.

Often, the mention of insurance leads to an immediate eye roll and a dismissal of consideration. However, the variety of insured products available today allows for a number of strategies that should at least be considered for every financial plan.

What to Consider when Formulating your Insurance Strategy

There are risks that we face that cannot be avoided via portfolio management. Insurance products are a means by which risk can be shifted to a company that can better manage it. For example, the loss of income associated with a sudden disability would normally devastate our families. This devastation may be avoided with a properly constructed disability insurance policy.

Discussing the cost of a loss of life in terms of financial consequences is difficult in light of the emotional toll of such a loss. However, the facts are that the loss of the primary breadwinner in a home might have a devastating effect on the futures of the surviving spouse and children were it not for the existence of a properly constructed life insurance policy that provides for the replacement of the earnings lost with the passing of the spouse. Often overlooked is the value of the stay-at-home spouse working to care for children in their formative years. In the event of a tragic loss, the children still require daily care that now requires funding. To speak of such emotional losses in a clinical manner is difficult. However, an uncomfortable conversation early in the financial planning process is essential for financial security.

Of course there are retirement and estate planning strategies associated with so-called “permanent” life insurance (e.g., whole life) when a long life follows the purchase of a policy. We integrate these strategies as part of your financial plan.

How Much Insurance is Too Much Insurance?

This is a question often asked in the beginning phases of insurance planning, as there are many products available with many options, which can be confusing during the evaluation process. Our goal is to understand your goals in order to create a road map that fits with your specific needs and situations.

Insurance is only one product among many that will make up a proper financial plan. Insurance is a relatively illiquid financial product, so using insurance as a portfolio security is not a good idea. It is certainly possible to have too much insurance, especially if funds devoted to insurance unnecessarily leave other saving and investing vehicles short of funds.

A client’s profile may call for a combination of taxable and tax-exempt investment strategies that insurance alone will not be able to fund. Insurance’s primary role is risk mitigation. After all contingencies have been reviewed and insurance is in place to protect a financial plan, then insurance can be considered as an investment option along with any number of wealth management and estate planning/legacy options.