Risk is a part of everyday life — and though we don’t often look at life through this lens, regular everyday activities such as driving a car, mowing the lawn, playing recreational sports, and many other things can create some sort of risk. This is no different when it comes to your finances. Managing that risk is critical to maintaining your long-term security. That’s why at Financial Enhancement Group risk assessment isn’t just a side conversation. It’s a core critical element of the planning process.
People tend to think financial planning is just about investments, but it’s also about protecting what you’ve built, and those you care about. That starts with identifying blind spots — the unexpected events that could derail your financial goals if you’re not prepared.
The first important blind spot? Life insurance. It’s not a fun conversation, but it’s necessary. If a spouse or primary income earner passes away, what will the financial picture look like for the family left behind? You can find different debates as to the proper amount of insurance coverage, but we want you to simply look at the LIFE acronym.
- Liabilities – Help your family remove any stress from debt payments.
- Income – Replace the loved one's salary via life insurance to help eliminate the need to make dramatic lifestyle changes based on money.
- Final Expenses – Pay funeral costs, outstanding medical bills, etc. Also consider time for family needed to be away from work to mourn the passing of a loved one.
- Education – Plan to achieve goals and avoid any future monetary obstacles for children and loved ones.
Disability insurance is another area that’s frequently underestimated and overlooked. Of course, some professions certainly have more risk than others. Many people assume that because they have a desk job, they’re not at risk. But disabilities can come in many ways — not just the kind that lands you in a wheelchair. Musculoskeletal and cardiovascular diseases, illness, and mental health are just some of the many issues that can limit or eliminate one's ability to earn income. Losing the ability to earn income for even a short time can significantly impact your plan if you're not protected.
Health insurance also plays a big role in risk management. A solid understanding of your annual healthcare costs can assist in making this decision among the various options. Choosing a high-deductible plan might make sense if you and your family are healthy and won’t have major medical costs will likely be the most cost effective. When choosing this option, however, you will want to make sure you have emergency savings or a Health Savings Account (HSA) in place to cover an unforeseen medical event and the unexpected expenses. On the other hand, if you know you have ongoing medical needs, opting for a higher-premium, lower-deductible plan could save you money in the long run. Please note that the “One Big Beautiful Bill” act expanded plans which allow the use of an HSA. We at FEG are big fans of Health Savings Accounts. Tax deferred contributions and growth, with tax-free distributions for qualified medical expenses, are not provided with other investments.
Other key areas to address when reviewing insurance coverage include the following:
- Homeowners and auto insurance will guard against property loss and liability. Ensure coverage is high enough to cover the value of the property (this will change year-to-year).
- An umbrella policy will provide extra coverage across the board. The additional coverage needed will be based on your current assets that need protected.
Insurance isn’t one-size-fits-all. Your coverage should reflect your unique stage of life, responsibilities, and financial objectives. At FEG, we work with families to identify exactly what’s needed — not just what’s popular or easy.
Paying premiums may not be your favorite way to spend your money, but for those who need to use that coverage, it’s worth every penny. Insurance is something we hope you’ll never use — but if life takes a wrong turn, it can be the one thing that saves your financial future from going off track.
If you’re unsure whether your current insurance coverage aligns with your goals, we’d be happy to help. During our complimentary Next Steps meeting, we’ll evaluate your entire risk landscape and make sure nothing has been overlooked.
Financial Enhancement Group is an SEC Registered Investment Advisor.
