“Everyone has a plan ‘till they get punched in the mouth,” Mike Tyson famously said. That quote comes to mind often, and it has a great application in financial planning. You can start saving early and invest wisely to accumulate a large nest egg, but if you don’t at least think about what could negatively impact your plan, you could see decades of accumulation disappear very quickly.
Insurance protection is something people view as a necessary evil. Having the right home, auto, and life insurance coverages can help you protect against catastrophic losses. Health insurance and navigating the alphabet soup of Medicare supplemental coverages can be a substantial expense in retirement. Disability insurance can be a good supplement to your income if you are unable to work. Long-term care insurance is something worth considering in retirement if your assets and income are enough to comfortably support paying for a policy, but not enough to consider self-insuring.
Although talking about insurance coverages is not everybody’s idea of a good time, being able to identify the right amount of coverage you need and protecting those you love and all you have worked for is the foundation of a solid financial plan. An insurance agent once told me he never had a beneficiary complain that somebody had too much life insurance. While I am sure that is true, it is still important to make sure the coverages you have are in place to accomplish your goals. An in-depth financial plan will allow you to look at scenarios with and without insurance coverages and even show you what a catastrophic loss or illness will do to the success rate of your plan. That is really just a fancy way of saying can you take a punch in the mouth?
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