Do You Offer Insurance?
Insurance is one thing few people love to buy, and it is something we hope we never use. Thankfully I've never used my homeowner's insurance to rebuild my home from a fire though I've been paying premiums for a quarter of a century. I would have been better off investing my dollars in the stock market rather than paying my premiums, but that's not the point. Insurance is a must-own product to protect several parts of your life.
Since I launched my investment firm, I've not offered insurance products until now because I've been frustrated with the process of referring clients to insurance brokers. Also, during our financial planning process, we have witnessed horror stories where people were under-insured or did not own any coverage. As a result, we now offer insurance services to help our clients better.
Insurance should cover high-risk, high-cost items like your life, home, car, business, etc. You do not need insurance to pay for low-risk, low-cost things like repairing your windshield after a rock hits it.
Who should own insurance? Let's take a look.
If you are responsible for children or other people in your life, you need life insurance. Life insurance is not about you but your loved ones. It's irresponsible and selfish not to own a policy that will protect your family if you die young or without assets. Your life insurance amount should replace your salary until your children are grown, pay for their college, eliminate your debt obligations, and provide an income stream for your spouse. And, yes, you should purchase insurance for your non-working spouse. As your assets grow, your children age, and you reduce your debt, then the need for life insurance dwindles.
If you're self-employed, disability insurance is a must. You can only die once, but you can become disabled several times, so it's imperative to generate income while you're incapacitated. Disability insurance meets this need.
As people age, longevity risk is a genuine concern. An annuity will ensure you do not outlive your money, and it will provide a guaranteed income stream for life, a promise few other investments offer.
Long-term care insurance offsets the high cost of a nursing home or assisted living facility, and it can also offer home healthcare. Adding a long-term care insurance rider to your life insurance policy may offset the cost of a standalone policy. According to smartasset™, the estimated annual cost for a private nursing home is $108,408, and it's rising faster than inflation. A policy covering three to five years in an assisted living facility is good to start.
No one likes to talk about their mortality or contemplate bad things happening to their family. Still, it is imperative to review your obligations and commitments so you can protect those you love. You can transfer your risk to the insurance company for a few dollars, and paying for insurance premiums is less costly than dying without life insurance.
Does everybody need insurance? No. You can self-insure if you own substantial assets like stocks, bonds, or cash. How much money is required to self insure? It depends on your situation, but a financial plan can answer the question of how much is enough.
A policy of life insurance is the cheapest and safest mode of making a certain provision for one's family. ~ Benjamin Franklin
April 4, 2022
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management, located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM's custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor.
 https://smartasset.com/insurance/how-much-does-long-term-care-insurance-cost, Javier Simon, 4/1/2022