By Matthew Gaude & Shawn McGuire
Often when we think about finances, we focus on accumulating. We want to save for our various goals and build up a nest egg, but a great savings rate means nothing if your financial plan doesn’t include appropriate protection against risks. Risk management through insurance is a critical part of a comprehensive financial plan. Without adequate insurance coverage, your financial future is not safeguarded.
With the right insurance tools, you can ensure that your assets are protected and your family or business has a secure future, even if the unexpected happens. Here are four key types of insurance that are an important part of your financial plan:
1. Life Insurance
Thankfully, this is the least commonly used insurance of the four, but the most regularly purchased due to its importance. Life insurance protects your dependants in the event of your death, so it’s crucial to carry life insurance if you have children or other dependants. Additionally, it’s wise to make a habit of updating your coverage based on your needs at least once per year.
As of 2017, only 59% of Americans carry life insurance and a third of those only have a basic group policy.1 This is in opposition to the fact that 84% of Americans believe life insurance is essential. Life insurance policies should be purchased to take into account mortgages, non-mortgage debt, childcare, college savings, and more. Stay at home parents should also have coverage since they provide valuable work that would be costly to outsource in the event of their death. Business owners may have other insurance needs to protect the future of their business.
The next three insurance coverages are considered living benefits insurance. In other words, these policies serve as income replacement and health cost coverage tools to have in place in order to ensure that you and your family can reach your financial goals with as little financial disruption as possible while you are living.
2. Long-Term Disability Insurance
The Social Security Administration estimates that the average 20-year-old worker has a 3 in 10 chance of being disabled before age 65,2 but only one-third of Americans have disability insurance.3 An accident, injury, or illness that keeps you from working can wreak havoc on your financial plans and set you back months or years. Common long-term disabilities can even include neck, back, or joint disorders.
While many people believe they are covered by their employer’s long-term disability insurance, the coverage may be limited and inadequate. Coverage of up to 2 years is the typical limit for employer benefit long-term disability plans. The need for a private long-term disability coverage will pick up where employer’s long-term benefits fall short. Before your employer long-term benefit is activated, most employer’s short-term benefits will provide coverage for three to six months. If you have a high-paying job, it’s especially crucial to purchase long-term disability insurance to protect against an unexpected loss of income.
3. Critical Illness Insurance
While no one wants to think about a life-changing illness entering their life, it happens more often than you might think. Critical illness insurance pays a lump sum amount to help with the costs associated with the illness. This insurance is unique because there is flexibility with how you can allocate the funds. You can use it to replace income for you and your spouse while you are dealing with an illness or it can provide for alternative medical treatments not covered by other health insurance. If you don’t want to worry about money while battling a serious illness, consider critical illness insurance for peace of mind.
4. Long-Term Care Insurance
If you are approaching age 65, it may be a gamble to go without long-term care insurance. According to the U.S. Department of Health and Human Services, an average 63% of people turning age 65 will require some form of long-term care during their lifetimes. Additionally, 20% of 65-year-olds will need long-term care for more than five years.
Long-term care insurance covers the cost of services that include a variety of tasks you may need help with as you age. Today’s long-term care policies offer more flexibility and benefits than ever before. It is important to understand the long-term care insurance options available to you and whether or not a policy is appropriate for your lifestyle and needs. While some policies can be expensive, requiring long-term care without insurance in place can be financially devastating.
Do You Have The Right Coverage?
Have you reviewed your insurance coverage within the last twelve months? If not, you may benefit from a comprehensive review to protect your family and your financial future. Since insurance can get complicated, someone experienced with insurance policies can offer you guidance on the products available to you and how they can integrate into your other financial strategies. If you need a second opinion on your portfolio or would like to discuss how insurance can lower your risk and protect your assets, schedule an appointment online so we can help you secure, maintain, and protect your financial lifestyle throughout your lifetime.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insights and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors.