Online exclusive

Ensuring a Well-Rounded Insurance Plan

As your financial stature evolves, your coverage may require a refresh so that it
still can provide the peace of mind it should.

Online exclusive

Ensuring a Well-Rounded Insurance Plan

As your financial stature evolves, your coverage may require a refresh so that it
still can provide the peace of mind it should.

Take a minute to consider the person who helps you navigate the maze of insurance matters. Is it the agent who has worked with your parents for years? Or is it your college roommate-turned- insurance-guru? Perhaps it is a relative who represents a large, mass-market carrier.

While such connections may be convenient, it is important to revisit your coverage needs as your wealth grows over time — especially for those who have encountered newfound wealth.

“Yes, insurance is good to have,” says Warren Arnold, Team Lead, National Wealth
Advisor Group. “But sometimes you have to divorce the product from the person selling
the product to be certain that you’re getting the right coverage within the broader context
of your entire financial picture.” “Some clients, especially first-generation wealth creators, may not understand the magnitude of coverage they need, and I sometimes have to be blunt and tell them: ‘You’re a wealthy person and you have to insure yourself like a wealthy person.’”

While cutting long-standing ties may be difficult, the alternative of having inappropriate or inadequate coverage when you need it can be much more painful.

Many facets to consider

Simply put, insurance can be viewed as a risk management tool — one that can help mitigate the financial impact of death, disability, disasters and other unknowns. More importantly, proper coverage can be quite effective at helping resolve short-term issues, as well as achieving long-term goals. But while everyone’s situation may be unique, Arnold regularly shares the following key guidelines and reminders with his clients:

  • Health insurance: If you are an avid traveler, you may want to verify whether your domestic insurance plan covers any medical visits abroad.
  • Disability insurance: For the average 20-year- old, one in four is likely to become disabled before reaching the age of retirement, according to the Social Security Administration. Disability coverage with full income replacement, however, is rare. Arnold recommends that you maximize the coverage as best you can and realize that if you do become physically unable to work, your lifestyle will likely change, so it is important to account financially for that adjustment.
  • Life insurance: In addition to replacing income, life insurance can be used for estate liquidity, wealth transfer, philanthropic purposes or in succession planning for business owners. Once you have your objectives in order, determine how much coverage makes sense.
  • Long-term care insurance: Arnold advises clients to examine what type of care is covered, how long the policy will pay benefits and how it allows for inflation for those who pursue a policy. Creating a long-term care plan now can potentially help you and your family save hundreds of thousands of dollars.
  • Property/casualty insurance: It is essential to keep yourself protected, but you also cannot forget to safeguard your homes, vehicles (including boats and planes) and artwork. Start by researching companies that are known for insuring such assets, and consider an insurer with relevant expertise if you or your homes are located in a region prone to natural disasters.
  • Auto insurance: Arnold explains that it is critical that you maximize your coverage for underinsured or uninsured drivers. Furthermore, cover all potential drivers on all vehicles, including those housed at vacation homes.
  • Umbrella insurance: As your wealth grows, so should your wealth’s protection plan in the case of a major claim or lawsuit. It is also ideal to purchase an umbrella policy from your home and auto insurance carrier to avoid gaps in coverage and to guarantee that all of your assets are protected.

Prioritizing insurance: When is the right time?

While having complete coverage throughout every phase of life is ideal for many, Arnold advises clients to leverage specific coverage priorities based on age. Here are four broad milestones during which it’s wise to consider, purchase, review and revisit your coverage:

  • 25 to 40: This may be the best time to consider disability and life insurance. Not only do you have a lifetime of earnings ahead of you, premiums are often lower for younger consumers. Similarly, umbrella insurance is just as important to consider as it serves as a complement to property and casualty insurance, especially as your physical assets grow.
  • 40 to 55: Long-term care and disability insurance are the priority considerations. During this phase in life, it may also be time to revisit your health, life and umbrella insurance to adjust to your changing needs. In the case of your umbrella insurance, risks may rise as your wealth and estate grow.
  • 55 to 70: Transitioning into your retirement years may mean having to transition your life insurance coverage needs as well. Life insurance becomes less about income replacement and more about protecting your estate, and your health insurance will be much different after Medicare benefits kick in. As for your long-term care, costs may become increasingly prohibitive after age 60.
  • 70+: It will be beneficial to reconsider your life insurance needs in a strategic sense, keeping your legacy and beneficiaries in mind. The same applies to your umbrella insurance, which at this time should be viewed as one way to safeguard your wealth for yourself and the next generation.

“Some clients, especially first-generation wealth creators, may not understand the magnitude of coverage they need, and I sometimes have to be blunt and tell them: ‘You’re a wealthy person and you have to insure yourself like a wealthy person,’” Arnold says. “I then explain how other people in their situation have done it and, perhaps just as importantly, I explain why.”

Ultimately, your financial security is not dependent upon insurance. But as part of a broader financial plan, the right coverage can help smooth the unknown bumps that are sure to arise along the road ahead.