At Creekmur Wealth Advisors, our job is to design unique strategies that help our clients reach their goals in the most efficient manner possible. However, despite our best efforts to plan for the future, sometimes life steps in and throws us a curveball. Experiencing a catastrophic life event could quickly derail an otherwise effective plan and leave us scrambling to pick up the pieces.
Risk is part of life, but each life stage brings different risks. It is crucial that we identify these major risks and protect against them with the most effective solution available. Often times that solution comes in the form of insurance.
Whether it’s early in life, late in life, or at the end of our life, utilizing the proper insurance product to reduce overall risk could provide the protection needed to prevent a life catastrophe from causing even greater stress.
1. Plan for Income Replacement.
Many of us spend a large portion of our life earning a paycheck to cover needs such as housing, groceries, school, entertainment and much more. Whether you are a family of one or twelve, virtually everyone has expenses that need to be paid on a regular basis. Since workers most likely rely on their regular paycheck to cover these expenses, one major risk to any family is an interruption to that income.
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Disability is a real threat facing every wage earner. Being unable to work for an extended period of time due to a disability could have a significant impact on a household’s finances. There are short and long term insurance solutions to provide a safety net if a disability were to occur. Disability insurance policies generally replace as much as 60-70% of an individual’s lost wages in the event of a covered disability. This replacement income would help a household cover those expenses and bills that would persist regardless of employment status.
2. Plan for Long-term Care Needs.
As we age, a different risk begins to present itself—the possibility of needing some type of long-term care. Statistics show that 69% of those turning 65 will need long term care at some point in their life. Over 15% of those same individuals will spend more than $250,000 on long term care over the course of their lives. Trying to cover that cost out of an investment portfolio alone could have significant ramifications to the retirement plan—especially to the healthier spouse.
There are many different products available right now that provide some type of long-term care coverage. The options range from traditional long-term care insurance to various annuity payout options. Just as a carpenter needs to use the right tool for the task at hand, it is important that the correct form of long-term care insurance is used for your specific situation. Your Creekmur Wealth Advisors team has extensive experience selecting the best tool for our clients’ specific need.
3. Provide for your loved ones at the end of your life.
Even if we protect against all major threats during our lives, the end of our lives brings unique risk considerations. Death of a family member presents different challenges depending on when it occurs.
If a wage earner passes away, any remaining dependents would be without that person’s income—similar to the impact of a disability. Therefore, during our working years we often utilize life insurance as a replacement for wages.
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In retirement, the death of a spouse could potentially mean the loss of pension or social security income—so life insurance could once again be appropriate to ensure that the surviving spouse is able to continue covering their living expenses throughout the remainder of their life.
For some individuals, death could bring with it a large tax impact. In that case, life insurance could be used to ensure that heirs and beneficiaries receive the desired inheritance.
As is the case with products used to cover a long-term care need, life insurance coverage comes in all shapes and sizes. Choosing whether to use a permanent policy with cash value growth, a temporary policy that eventually goes away, or some other type of coverage completely is a difficult task.
A qualified financial planner can help you pick the right solution for your unique risk situation.
Having options to choose from is helpful in that it allows us to pick the best tool for any given situation. At the same time, the sheer number of insurance options available on the market can be overwhelming to a consumer. If you have concerns that one of your specific risks is not currently covered, your advisor would be happy to discuss that with you and determine what steps need to be taken.
Andy
Do you have other questions about Insurance?
Text our team for answers at 309-925-2043
https://www.fool.com/retirement/2018/09/02/5-long-term-care-stats-that-will-blow-you-away.aspx
