Managing Liabilities with a Smart Insurance Plan
For anyone who has felt the pinch of maintaining your life savings while providing for an uncertain future certainly knows the struggles of managing their liabilities for life's milestone moments. For instance, the purchase of a first vehicle or home can be exciting but these purchases also come with realization that protection may be needed from any unforeseen accidents or maintanance costs. Other large events in life, such as the beginning of a marriage, the arrival of a child, or the estate planning of a close relative or loved one may begin to help those skeptic of purchasing insurance understand the importance that comes from owning a life insurance plan or a reserved income stream if any unforeseen event were to occur. And finally over time, we then come to acknowledge that sometimes people become sick and need extra care that can rapidly deplete assets, leading to extensive research regarding liabilities, disabilities and long term care coverage. All of these issues can be minimized by the right research, the right resources, and the right insurance plan for your needs; but of course, some issues are bound to pop up that may be individually different from one person/family from the next. Asking about these issues is the key from purchasing a regular insurance plan and a smart insurance plan.
Below are a few popular questions our firm deals with when it comes determining insurance goals for our clients. Of course, these are just broad speculating answers to these milestone-considering questions; but they should give you a better foothold on what to look for when planning for the future.
Home, Auto, Life Insurance - Are these the only liabilities that can, or should, be insured against?
The best answer to this question is a resounding - it depends!
Entrepreneurs and business owners know that financial risk comes both from personal circumstance and some come from professional duties. Sometimes insurance is an important part of business financial strategy. A key person policy, insuring the life of a founder or important executive, is oftentimes the best way to manage business continuity in the event someone critical to the business dies unexpectedly. This coverage can allow the surviving spouse or beneficiaries to be bought out, even during times of cash shortfall within the business itself.
What if I don’t own a business? Do I need more than the basics like life, auto, etc?
Unfortunately it’s often not always that simple. Even if your needs don’t extend beyond things like term and permanent life insurance there are special circumstances that require additional planning to manage.
Consider a private individual who maintains a family heirloom, a home by the lake, a classic car or a small boat and they intend to leave them to heirs upon death. When included in the value of the estate these treasured items may inadvertently trigger estate tax consequences, forcing the disposal of these family treasures or other assets to cover the tax bill. While estate taxes aren’t a current liability for someone still alive they have a nasty habit of becoming very real at a time when those who pass on can do the least about them, unless proper steps have already been taken.
I am healthy and take good care of myself; do I really need to worry so much?
Those who are healthy and have a family history of longevity face what is commonly known as longevity risk.
It’s counter-intuitive to think that living too long is a risk, but for most of us the reality is that it is entirely possible to outlive our savings. With life expectancies rising and medicine advancing by leaps and bounds this is a particularly pressing concern, even for those with less than healthy habits or genetic history.
Fortunately there are proven methods for insuring against outliving your money. Annuities are known as a common way to provide income for life, but these are provided by a variety of companies and have menus of benefits that aren’t necessarily intuitive or easy to navigate. For this reason the purchase of something as important as an annuity is best managed through a comprehensive insurance plan that provides robust solutions that take into account all both the obvious and less apparent risks in life.