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3: Analyze Your Circumstances

Protect What You Have

hand holding house, car, wheelchairThe ability to absorb a financial shock (to your property, health/life or income) is part of financial well-being. It’s not always comfortable to think about a loss in any of these areas, but running scenarios can be helpful to prepare you when something bad does happen.

Insurance provides protection from financial loss and mitigates the risks that we all face at some time in our lives. Which of insurance types do you have?

  • Auto loan and mortgage lenders insist on insurance to cover your vehicle and your home. Renters insurance covers your personal property. All of these insurances also help protect you from liability claims.
  • Protect your family’s financial future with health insurance, workers’ compensation, life insurance and long-term care insurance.
  • Safeguard your financial savings with disability insurance, life insurance and unemployment insurance to provide income for you and your family in the case of illness, injury or death.
  • Liability insurance, also called umbrella coverage, protects you against injury and property damage claims from others. Umbrella liability insurance goes beyond the underlying liability coverage provided in homeowners and auto policies, usually in increments of $1 million.

Focus on Catastrophic Events

Have you thought about what could happen if your income was reduced, for example, if you were suddenly struck by serious illness and were unable to work? Unpleasant as they are to contemplate, bad things do happen. Consider Michael’s story.

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Michael’s Story

I am a financial planner, and I’ve helped quite a few clients get their financial lives aligned with their life goals and plans. Along the way, I tried to do the same thing for my wife and me. The future plans we set counted on a continuing stream of good income, and it seemed that would be the case.

That all changed at the beginning of 2016.

One moment, I was following my usual Saturday morning routine and watering the houseplants. The next moment, I was in a hospital emergency room. I was dying from aortic dissection, and required major surgery. After spending two months in three different hospitals, I was released to continue my recovery.

Now, my wife and I are living a different life than before the surgery. My job, and along with it, my steady income, terminated. Though I do some consulting work, I only earn a fraction of my previous income. As you might guess, we are pretty tight financially.

Though we once looked at long-term disability policy premiums as an unwelcome financial drain, we now see the policy as the financial lifesaver it is. My medical expenses continue, and already the cost is around $1 million. Without good medical insurance coverage, we would be sunk. As it is, between the two insurance coverages, we’ve been able to do OK.

Perhaps you can use my experience to provide direction for yourself. As a financial planner, I knew and accepted the guidance to have a financial plan and to live within its parameters. We had (and maintain) good insurance coverage, even though the premium expense is high. We had been saving and investing money for years, money which we can now use to supplement our income.

For me, life will never again be the same (according to my medical team). However, careful planning has, and will continue to help with our financial well-being. I can pretty much guarantee that it can and will do the same for you.

Resources

Use these resources to help you evaluate your insurer:

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