Some people worry about their wealth not lasting their lifetime; others fret about overspending on insurance policies to protect themselves and their family. Still others wonder whether they need yet another professional to help them manage and achieve their overall goals.
These people all have something in common: they are identifying risks in their lives.
Every well-considered wealth-management plan includes an assessment of personal, property, and financial risk. Investments have risks that can’t readily be insured, so other risks must be managed in order to minimize threats to overall wealth goals. Fortunately, many of the personal risks that can threaten one’s wealth can be managed with proper insurance. Consider these five ways to reduce your exposure to risk:
1. Review health insurance annually:
Do you have a plan that adequately protects against the costs of illness and injury? If you do not have insurance through an employer or a group, private medical insurance can be expensive; it’s also vital. It is wise to regularly review this coverage for the mix of services and deductibles that best fit your priorities. Many successful individuals opt for plans that have a high annual deductible and strong, unlimited coverage for catastrophic events. These plans are attractive if you can easily afford routine doctor visits, while relying on the premium coverage should something unexpected occur. Other choices might emphasize stronger prescription coverage if needed.
Wealth goals can also go wildly astray if you are not staying healthy. The potential financial hit to accumulated wealth because of an unhealthy lifestyle can be substantial.
2. Consider long-term care insurance:
Studies indicate that at least one member of every couple living today is likely to need some kind of long-term medical assistance. Many people have the means to pay these expenses out of their wealth savings, but for many others, a long-term stay in a luxury care facility — due to dementia or some other debilitating condition — can derail their lifestyle or legacy goals.
If you have any medical conditions or family history that make you particularly vulnerable to health risks, or you do not have the means to cover these costs, consider long-term care insurance options. This is relatively inexpensive insurance to add prior to age 50, but it can get pricey later in life.
3. Don’t overlook disability insurance:
If you’re still working, disability insurance can provide a portion of your regular income in the event of a debilitating sickness or injury. Disability insurance is a must for successful executives and business owners who have built their wealth from income. If something unexpected happens, they can be left with little future income for themselves or their family. Disability insurance gives you the confidence that you will continue to enjoy the benefits of a lifetime of hard work. Some employers offer the opportunity to purchase disability insurance. If not, or if you are self-employed, it is worthwhile to obtain your own policy.
4. Buy term insurance during your child’s growing years:
Consider adding life insurance to help ensure that your children are raised with the opportunities you want for them. Term life insurance is the simplest and least expensive way to take care of children and families. Policies are effective for a specified number of years with a fixed benefit. If a policy is purchased when the first child is born, additional policies might be layered on to benefit any other children you might have. These policies have no cash value and if you fail to pay the annual premium, the coverage will lapse. Term policies also offer a fixed end-of-life benefit amount that you can decide on before purchasing the policy.
5. Protect the lifestyle of your spouse or partner:
A universal life insurance policy is not as cost-effective as term insurance, but it remains in force during your lifetime. It often includes an investment-like feature and accumulates a cash value over time. For this kind of protection, it’s usually most cost-effective to start with a 20- or 30-year term policy that can be converted into a universal life policy later on.
Liz Miller is the founder of Summit Place Financial Advisors, based in Summit, N.J. .