Using Insurance to Help Protect Your Financial Future

Insurance can play a vital role in safeguarding your financial well-being. Over your lifetime, it can help protect your wealth, your health, your family, and your long-term goals.

But to get the most from the protection insurance can provide, it’s important to make sure your coverage continues to evolve as your life changes. Insurance isn’t something you buy once and then let sit unchanged. Your coverage should be reviewed regularly as you move through key events and life stages, such as marriage, divorce, growing your family, buying a home, changing careers or retiring.

As you monitor and update your overall financial plan through the years, your wealth advisor can help you evaluate the appropriate tools to address your risk management needs.

Life Insurance

Life insurance is primarily designed to provide a financial safety net for your loved ones when you pass away. It can help them pay off outstanding debts, fund larger expenses such as a college education or protect a business during a transition. With thoughtful planning, certain policies may also provide financial support during your retirement or add tax efficiency to your estate plan.

Most life insurance policies fall into two main categories:

• Term life insurance is typically the more affordable and straightforward choice. This type of policy provides coverage for a set number of years. When the term ends, so does the coverage. If you outlive the policy, there is generally no payout to your beneficiaries.
• Permanent life insuranceis designed to provide lifelong coverage. In addition to a death benefit, some policies build cash value that policyholders may be able to access or borrow against. There are several types of permanent life insurance, including variable universal life, universal life, whole life, and joint and survivorship life. Each comes with different benefits, costs, and considerations depending on your needs
  and goals.

Coverage amounts and costs can vary significantly for both term and permanent life insurance, so it’s a good idea to compare your options before settling on a policy.

Something else to consider: If you’re working, your employer may offer group life insurance as an employee benefit. This coverage is often free up to a certain limit and easy to enroll in. But it may not offer some of the benefits available through an individual policy, including portability. As your family and wealth grow, you may also find that the coverage available through your workplace no longer meets your needs.

No matter which type or amount of life insurance you choose, it’s essential to keep your beneficiary designations up to date. That’s another good reason to review your policy regularly.

Long-Term Care Insurance

Of course, we all hope to live long, healthy lives. But as you get older, the likelihood increases that you or your spouse may need ongoing support following an illness, injury or cognitive decline.

Many people are surprised to learn that Medicare has significant limits on the long-term care services it will cover. And while Medicaid can help pay for long-term care, eligibility generally depends on meeting strict income and asset requirements.

Long-term care planning is designed to help prepare for these expenses while protecting the retirement savings you’ve worked hard to build. Potential strategies include:

• Traditional long-term care insurance is fairly straightforward. You pay premiums as you would for most types of insurance, and if you don’t need or use the coverage, you typically won’t get your money back. Generally, you must need help with at least two of six activities of daily living (ADLs)—such as bathing, dressing, or eating—for benefits to be triggered.
• Hybrid life/long-term care policies combine permanent life insurance with long-term care benefits. Depending on the policy, you may be able to access a portion of your death benefit to help pay for qualified care expenses, reducing the benefit your beneficiaries receive when you pass away. If you don’t require long-term care, your beneficiaries generally receive the full death benefit.
• Self-funding your care means using your family’s personal resources—including savings, investments, and other assets—to cover care costs. To help ensure funds are available when you need them, you may choose to set aside assets specifically for this purpose.

There is no one-size-fits-all solution for covering potentially significant long-term care costs. Each approach has its own advantages and trade-offs. One of the most important things you can do for yourself and your loved ones is to start planning while you’re still in good health and well before care is needed.

Other Insurance Gaps to Consider

Insurance gaps often stay hidden until an accident, illness, lawsuit or other unexpected event occurs. Here are some additional types of coverage you may want to discuss with your wealth advisor:

• Umbrella or excess liability coverage can provide an extra layer of protection against liability claims that exceed the limits of your standard auto or homeowners insurance.
• Disability income insurance can help replace a portion of income for professionals and business owners who are unable to work due to a qualifying illness, injury or disability.
• Homeowners and personal property coverage should be reviewed regularly to reflect current property values and help ensure valuable possessions are adequately protected.
• Key-person insurance, buy-sell agreements, and additional liability coverage can help provide business owners and high-net-worth families with financial resources and greater clarity during times of transition.

Making Insurance a Part of Your Financial Plan

At Octavia Wealth Advisors, we believe insurance coverage is an important component of a coordinated financial plan. After all, the decisions you make about insurance can affect your taxes, your business, your retirement, and your estate.

The Insurance Information Institute recommends reviewing your insurance coverage at least once a year, and we agree. Regular check-ins with a qualified professional can help identify coverage gaps, address outdated policies and make sure the financial future you’ve worked so hard to build remains well protected.

If you’re ready for an insurance review or have questions about how your coverage fits into your broader financial plan, please don’t hesitate to reach out.