Why is a financial planning important? It is important if you want to achieve long-term financial success. The purpose of a financial plan is to help you determine where you are financially, where you would like to be, and how to get there. Insurance plays a critical part in your comprehensive financial plan by helping you mitigate risk and associated financial costs.
Your insurance needs should be based on your age, family, and economic circumstances. There are many types of insurance but like a financial plan, there is no one-size fits all model. Each person’s situation is unique and requires tailored solutions. Here are some types of insurance that are important for your long-term financial success.
Home insurance helps you repair, rebuild, replace, refurnish damage or loss to your house and related structures. Also, it can help insulate you against lawsuits from third parties due to injuries suffered on your property. Homeowner insurance coverage at minimum of 80% of your domicile’s replacement value, less than the value of the foundation and land, is essential for you to be protected for home repair cost.
Auto insurance covers you against damage to your car and/or from liability for injury or damage caused by you or another person driving your auto. Also, it covers expenses you or someone in your auto may sustain due to an accident with an uninsured motorist.
Auto insurance liability coverage is essential for anyone who owns a vehicle. States necessitate liability auto insurance before a vehicle can be registered by the motor vehicle department. But many times, the state minimum requirements and guidelines are not enough to provide you adequate protection. General minimums are a $300,000 limit per accident, $100,000 for medical expenses per injured individual, and $50,000 for property damage. You might want to consider fire, collision, and theft auto insurance coverage that is more than the advisable minimal value.
Disability Income Insurance
Short-term disability and long-term disability insurance is offered by employers through the group insurance plan. You should take advantage of disability insurance through work. However, any disability benefits from a work policy are taxed while independent disability insurance policy benefits are not taxed. You can never get 100 percent of your income during a disability but can come close to receiving benefits of 70-85 percent of your income. Disability income insurance can help you maintain your standard of living by helping you meet your regular expenses.
It is generally accepted, the most critical of all the insurance for the long-term success of you and your family. Life insurance, in case of your passing, pays the death benefit without going through probate to your surviving spouse, children, and any other dependents. The death benefit funds are indispensable in maintaining your family’s standards of living. The life insurance can help repay debt, and can fund your children’s college education tuition costs.
Majority of people receive medical health insurance as an employee group insurance benefit. Due to the high costs associated with private health insurance, people choose to get insurance through their employer, if available.
Long-Term Care (LTC) Insurance
The high cost of medical services, nursing home, and at-home health care is not going to decline, but keep increasing in the future. Long term care insurance helps defray costs associated with home care, nursing care, and other health services if you are not able to perform one or more Activities of Daily Living (ADL). The ADLs are eating, dressing, toileting, transferring, bathing, and continence.
In summary, your insurance needs are unique and require tailored solutions. The insurance solutions work best when they are part of a comprehensive financial plan. Nevertheless, acquire insurance that best meets your needs.