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The language matters in your insurance & risk mitigation planning Thumbnail

The language matters in your insurance & risk mitigation planning

Although we do not consider ourselves Insurance agents, there is no doubt insurance or the lack thereof plays a role in the overall financial plan and for that reason alone they need to be reviewed annually or upon contract due dates.   In our years of advisory experience we have seen that what insurance products do very well is cover the unexpected without interruption to the financial plan, but there needs to be an insurable interest.  Let’s highlight some examples of unexpected events that may occur. Junctures, like these below, are good examples of when insurance products can help alleviate the financial burden or cover the insurable interest:

  • Car accidents
  • Homeowner’s insurance claim
  • Health and dental needs
  • Disability or death
  • Need for income payment for life
  • Long Term Care needs

If you are getting the impression that I can go on forever, you are right.  The difficulty is that when it comes to insurance there is no blanket statement like “Everyone should be saving 15% of their paycheck for retirement” or “No more than 30% of your annual salary should be used for housing or mortgage payments”.   If persuaded, you can see how one can make arguments to insure everything in your life.   But that would be very expensive and leave little room to live, much less fund a successful retirement plan and growth strategy.  So, given all of this uncertainty, so many variables, and with limited funds to cover everything, how do we manage and navigate risk?

Since all of our clients have different insurance needs, the first thing we do with every client or prospect is to try to identify the mistakes they may be making first and then build the plan from there focusing on a compromise between the Absolute Need and the Human Value Element.  Below are the top 3 mistakes that we as advisors, operating from the fiduciary standard, see daily that contradicts our strategy:

  1. Simply not paying attention
  2. - Usually seen when policies are on auto draft and inexpensive but may be overlapping a group benefit or just not needed at all due to time passing or possibly not understanding what the coverage is from the beginning

  3. Not price checking
  4. - Whether it be car insurance, homeowner’s insurance, or life insurance there is a cost to coverage and that coverage can be reviewed and priced annually or periodically depending on the purpose of the coverage  

  5. Either having too much or not enough insurance
  6. - Easily seen in the case of life insurance and annuities that are either costing too much money for unnecessary coverage or coverage over the insurable interest. This mismatch is due to changes or not enough coverage which leaves a financial plan incomplete at retirement or death.

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Staff