We use a variety of insurance products to manage risk in different areas of our lives in order to protect our wealth from losses that can come from property damage, businesses we own, disability, retirement and death. Instead of considering these products as separate items, make them part of an integrated, overall risk management plan and align your insurance products with your estate planning.
The Key Takeaways
• A variety of insurance products are used to help manage risk and protect wealth.
• The best results occur when separate insurance products are part of an integrated plan.
Different Kinds of Insurance for Different Risks
Most insurance can be grouped in these general categories.
Property: This would include insurance on automobiles and other vehicles; home, furnishings, jewelry and artwork, and personal liability insurance.
Business: Business owners need insurance on a building they own, office equipment and computers, as well as liability, worker compensation, errors and omissions insurance, and so on.
Health and Disability: Disability income insurance replaces part of your income for a certain length of time if you should become ill or injured and unable to work. Health insurance helps to pay for medical services received. Long-term care insurance helps to pay for extended care that is not covered by most health insurance or Medicare.
Retirement: Annuities and other insurance products can help replace income after retirement.
Estate Planning: Life insurance is often used to replace an earner’s income; to pay funeral expenses, debts and taxes; to fund family and charitable trusts; to fund a business buyout and compensate the surviving owner’s family; and to provide an inheritance to family members who do not work in a family business.
What You Need to Know
Remember, insurance is for risk management—to protect your wealth from potential areas of loss. If a risk is no longer there (the exposure ends or you are able to self-insure and cover the risk yourself), then the insurance coverage for that risk can be eliminated. Aligning insurance products with estate planning helps ensure that you minimize those risks during your lifetime and after your death.
Actions to Consider
• Trying to coordinate your insurance and manage your risk yourself is a daunting task. Instead, work with a team of advisors who have the knowledge and experience to help you make sure your risks are covered at the appropriate levels, without duplication and unnecessary costs.
• An advisory team will usually include your financial investment advisor, estate planning attorney, and life, health and property/casualty insurance agent(s). Other members may be added to this team as needed. You will probably find that your advisors will welcome the opportunity to work on your team, because they want to provide you and your family with the best possible service and solutions.