Insurance Planning: What does your family truly need?

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The proper insurance (life, liability and disability) are key to the financial well-being of your family—and your needs will change over time.

When it comes to wealth management, insurance is not often top of mind, but stands as a cornerstone of financial security and peace of mind. It serves as a protective shield against unforeseen events, safeguarding your assets and ensuring the well-being of your loved ones.

While the array of insurance options can seem overwhelming, understanding the different types and their significance is crucial for making informed decisions.

What kind of life insurance should you consider?

Life insurance provides financial protection for your beneficiaries in the event of your untimely passing (see estate planning). It ensures that your family's financial needs are met, allowing them to continue their lives without the burden of financial hardship.

Types of Life Insurance:

Term Life Insurance: Offers coverage for a specific period, providing financial protection during your most financially vulnerable years. Term gives you the ability to have substantial coverage in case your family needs longer term financial support should you pass.

Whole Life Insurance: Provides lifelong coverage and accumulates cash value, which can be accessed through loans or withdrawals. Because there is an accumulating value, it’s much more expensive to get the amount of coverage you’ll likely need.

Universal Life Insurance: Offers flexible coverage options and adjustable premiums, providing more control over your policy.

How do you know how much life insurance you need?

Your financial advisor can help you with this. Generally there are a few things you need to consider:

Cover your family. Consider your family's financial needs, including outstanding debts, mortgage payments, and educational expenses. Generally you start with the outstanding debt on your home or any other loans, then add in what you think the yearly cost of living would be for your family, and factor in any additional future goals (pay for college, pay for a child’s wedding, etc).

Account for your income. Factor in your current income and potential earning capacity. What level of coverage can you afford? What would be needed to replace your current income?

Supplement what you already have. Evaluate your assets and savings to assess your overall financial picture. How much would what you’ve already saved or invested in cover your family?

Consider liability insurance to safeguarding your assets.

Liability insurance protects you from financial losses arising from unintentional injuries or property damage caused by your actions or the actions of those under your care. It covers medical expenses, property damage, and legal fees. In a litigious society, if you have substantial wealth or assets, you may want to consider this option.

Types of Liability Insurance:

Personal Liability Insurance: Covers personal injuries and property damage caused by you or your family members.

Homeowners Insurance: Protects your home and personal belongings from various perils, including fire, theft, and weather damage.

Auto Insurance: Provides liability coverage for bodily injury and property damage caused by your vehicle.

Determining the Right Amount of Liability Insurance:

Assess your potential exposure to liability risks based on your lifestyle and assets.

Consider the value of your assets, including your home and vehicles.

Evaluate the minimum liability coverage requirements in your state or municipality.

Add disability insurance—just in case.

Disability insurance safeguards your income in case you become unable to work due to illness, injury, or accident. It provides a portion of your lost income, ensuring that your financial obligations can still be met.

Types of Disability Insurance:

Short-Term Disability Insurance: Provides income replacement for a limited period, typically up to six months.

Long-Term Disability Insurance: Offers income replacement for an extended period, sometimes until retirement age.

Determining the Right Amount of Disability Insurance:

Consider your income level and the percentage of income you would need to replace if disabled.

Evaluate your expenses and financial obligations to determine your replacement income needs.

Factor in the potential length of your disability and the availability of other income sources.

Additional Considerations:

Shop around for the best rates and coverage options.

Read policy details carefully to understand exclusions and limitations.

Review your insurance coverage regularly to ensure it aligns with your current needs.

Pay attention to the options offered by your employer. Often you can get a good deal on these types of insurance through your job—then supplement it with additional policies.

Optimizing your insurance is a crucial step towards financial stability and peace of mind. By understanding the different types of insurance, determining the appropriate coverage amounts, and carefully considering additional factors, you can create a robust insurance portfolio that safeguards your assets and protects your family's financial well-being.

However, we have found that sometimes people are OVER-insured, either participating in policies that offer too much coverage, or overpaying for a policy. At Range, we never try to sell you insurance and we can help you understand if your current advisor has sold you something that doesn’t make sense for your situation.


Insurance Optimization