It’s quite common for people to think of insurance as separate from the rest of their financial plan. The reason is simple. Most people think of their financial plan as a method of growing their assets. Your financial plan is about monetary goals such as retirement and the achievement of those objectives, in the minds of many people.
Risk Management Safeguards Your Assets
But while financial planning in San Antonio, TX is about growing your assets, it is not only about that. It is also about providing for your family and exhibiting good stewardship of God’s abundance. Saving and investing are part of that. But so is having sufficient insurance as part of a risk management plan.
Risk management is an integral part of your financial plan because it protects your assets. You can save and invest all you want in pursuit of financial goals, but it can all come to naught if you don’t safeguard your finances.
Health Insurance as Risk Management
What if, for example, you suddenly become ill or are in an accident? You may not be able to work or run your business. An emergency fund is part of a financial plan, as it can tide you over in case of the unexpected such as an illness or accident. But what if you fall ill and need treatment without health insurance coverage? Doctor’s visits, hospitalization, and prescription medication are all very expensive. Treatment for a serious and/or prolonged illness could add up to millions of dollars.
An illness is therefore doubly risky: without insurance, it could deplete your assets. Plus, if you aren’t able to work, you no longer have your income to cover expenses. Lack of health insurance could lead to financial ruin.
Mind you, you needn’t be seriously ill for lack of health insurance to pose a risk to your financial life. Even a minor illness can cost a great deal if you don’t have health insurance.
Plus, everyone should make sure to have preventive check-ups at least once a year. If you don’t, you run the risk of easily treatable conditions becoming something more serious by the time they’re discovered. But to not have health insurance coverage means you’d be paying out of pocket for preventive care needlessly, as most health insurance policies cover this kind of care.
Life Insurance as Risk Management
Life insurance manages risk in a slightly different way. Life insurance provides a death benefit to your loved ones when you pass away. If you financially support any family members, you should consider having life insurance.
If you don’t have life insurance and pass away suddenly, due to illness or accident, your spouse and children could be left entirely without the financial support you provided. They may be entirely responsible for bills yet be dealing with a sudden drop in income or assets, in addition to their grief.
Life insurance can also be set up to pay for things you intend to achieve as part of your financial goals, such as the mortgage on your home or your children’s college education. These are big-ticket items that your spouse may not be able to manage on their own in the event of your passing.
Disability Insurance as Risk Management
What if you were to become disabled? If you were unable to work, or needed care for daily life activities such as bathing or dressing, what would the financial impact be?
Here, too, a disabling condition would affect your assets. Care for a disabling condition would likely cost money, so it poses a potential drain on your assets. In addition, your earning power may be affected, which would also negatively affect your assets.
Disability insurance can provide benefits in case you suffer an accident or illness that disables you.
Long-term Care Insurance as Risk Management
As people age, they sometimes need long-term care, such as assisted living facilities or nursing homes. This kind of care, though, is typically not covered by health insurance. If you’re over 65 and have Medicare, it covers medical treatment, but not long-term care.
As a result, the need for long-term care can also pose a risk to your assets. If you need long-term care for a lengthy period, it can drain your assets, including your savings, your retirement funds, and even the equity in your home.
Risk Management as Retirement Planning
Retirement planning – making sure you have enough to meet your goals in your golden years – is an integral part of financial planning. Insurance planning as a form of risk management is an equally crucial part of retirement planning.
It’s prudent to discuss your retirement planning and health insurance needs with a financial professional. Although many Americans over 65 are covered by Medicare for health insurance, Medicare does have coverage gaps. It may be advisable to sign up for Medigap or other plans to ensure that you have full coverage.
In addition, you need to be prepared for out-of-pocket costs such as deductibles, premiums, and copays.
Your life insurance needs should be re-evaluated once you retire. If you are still supporting people financially, you may still need life insurance. You also may want life insurance if you are still paying on a mortgage.
Risk Management as Tax Planning
Health insurance costs such as premiums and deductibles are generally tax-deductible. Life insurance benefits are not taxable in most states.
Risk Management as Estate Planning
Your risk management choices should align with your estate plan and be congruent with it. For example, if someone is a beneficiary of your life insurance, be sure to account for that in your Will.
PAX Financial Group: Your Risk Management Partners
A CERTIFIED FINANCIAL PLANNER™ Professional at PAX Financial Group in San Antonio, TX can help you craft a risk management plan that safeguards your assets and protects your loved ones. Contact us to discuss your financial plan.
