Why Insurance Should Be a Part of Your Financial Planning
Proper financial planning is important to prepare your finances for retirement or to help you reach larger financial goals. While many people understand the importance of a strong investment or savings strategy as part of that plan, others forget how important insurance can be. Without the proper insurance coverage, you could be putting your wealth or financial progress at risk.
How Insurance Fits Into Your Financial Planning
You can think of insurance planning as a precautionary investment that shelters you from financial loss. Imagine spending years building your retirement savings only for them to be wiped out by an accident largely out of your control. Without proper insurance planning, this is a possibility. You can spend all the time and resources on investing in the right things to build wealth for your family, but without insurance, it could be wiped away at any time.
Insurance protects your finances from different types of financial liability that you or a family member may incur in the future. It is a safety net that helps you feel secure with your financial progress because you know that the insurance will cover any liability instead of you having to sell your home or investments.
Some people may believe that insurance is just an expense. This is because you could pay into some types of insurance without ever benefiting from a payout or needed coverage. However, this is a flawed line of thought because having the coverage is a smarter financial decision than risking the potential loss of finances. You’ll pay far less in insurance premiums than you would if you were liable for an accident or unexpected event.
Benefits of Insurance In Your Financial Plan
Insurance is a safeguard for your finances but carries more benefits than just peace of mind. Here are the most important benefits that proper insurance coverage can offer you:
Tax Benefits: Some insurance plans can save you money on your taxes. For example, life and health insurance premiums can be tax deductions each year. This provides an additional financial benefit to investing in insurance, making it much more than another expense.
Risk Mitigation: Insurance is a tool that eliminates or severely reduces the risk of financial loss. You can eliminate many risks by having the proper insurance coverage. For example, having the right health insurance can protect you from unforeseen hospitalizations.
Financial Security: Many people end up carrying more than they need in a savings or emergency account to prepare for unexpected expenses that could be secured via insurance. Buying the right coverage provides financial security that you know you won’t have to save cash for.
Variety of Coverages: There are many different types of insurance that can be tailored to your personal life. There aren’t one-size-fits-all insurance plans you’re required to obtain, but you can ensure you get coverage that protects your finances from likely risks based on how you live.
Protects Loved Ones: Buying insurance coverages, like life insurance, can benefit your family. If others depend on your income, then it’s essential to protect them financially in the event something happens to you. Insurance helps you do just that.
There are many benefits to buying insurance, and having the right insurance coverage can make all the difference in the financial decisions you’re able to make. This can help you build more wealth by using more of your finances on investments instead of planning for the unexpected.
Types of Insurance to Consider
There isn’t a one-size-fits-all solution for the specific types of insurance coverage everyone must buy. Some insurances are right for most people, such as health insurance, but others depend on your personal or family situation. Here are some of the most popular insurance types that you can consider:
Health: Health insurance pays for medical bills, whether it’s a routine checkup or a more serious illness that puts you in the hospital for weeks. Many people have run up tens of thousands of dollars in medical bills because they did not have proper health insurance when something they could not predict happened to them.
Life: As previously mentioned, life insurance is really to protect those who depend on your income for average survival expenses like housing or food. Life insurance gives your beneficiaries a large payout to get on their own feet if something were to happen to you.
Homeowners or Renters: Having insurance on your home or for the possessions in your home is essential in the event of a fire or other disaster. Homeowners insurance protects you from having a house that is destroyed that you can’t afford to rebuild because you’re still paying on the mortgage. Renters insurance covers all your possessions if you rent instead of owning your home.
Disability: If you become disabled due to an accident, then disability insurance can provide a percentage of your income that you may end up losing. This would be important for someone with a physically demanding career.
Auto: Auto insurance protects you personally from liability during a car acciden and protects your vehicle if something happens to it. This one is required if you have a car loan, and it’s a good idea anyway because so many accidents are out of the control of at least one party involved.
Liability: Liability insurance protects you personally if your personal liability is exhausted with other coverages. This might be important for someone who has large amounts of finances to protect or someone who personally works with large financial deals. It can also protect anyone from everyday liability like significant car accidents that create a lot of damage.
Business: If you have a business, you’ll want to make sure you have separate insurance coverage that protects your business and possibly a policy that protects you as an individual running that business. No one wants a large business liability to impact their assets.
Insurance coverage should be a part of everyone’s financial planning. While investing in the part of your financial plan that helps you grow your wealth, insurance is the part that protects it from liability, accidents, or unforeseen circumstances. Insurance Services at DECU are here to find you multiple quotes from multiple carriers and work to get you the most competitive rate for the best possible coverage. All done with top-ranked member service. Without the proper insurance coverage, you could be putting your finances at risk, which has the potential to set you back years if something bad were to happen. Contact us today to see how we can help you get the right coverage.