Insurance has always been a vital component of financial planning, serving as a safety net against unforeseen circumstances. Drawing from personal experiences and industry insights, this blog aims to demystify insurance and provide practical guidance for integrating it into your financial strategy.
A Personal Journey with Insurance
Growing up, I witnessed firsthand the impact of insurance through my father's long career as an agent. He taught me the importance of treating clients with respect and integrity, lessons that have shaped my approach in the financial sector. Today, as a professional with over a decade of experience in insurance and financial planning, I emphasize the need for a trusted advisor who prioritizes your best interests.
The Importance of Finding a Trusted Insurance Professional
In today's complex insurance landscape, finding a trustworthy advisor is paramount. With the rise of various products and strategies, the potential for misinformation is high. A reliable insurance professional will not only help you understand your options but also ensure that your insurance fits seamlessly into your broader financial plan.
As of November 2024, the national uninsured rate stands at 8.2%, which translates to approximately 27.1 million individuals without health insurance. This statistic underscores the importance of having adequate coverage, particularly in light of recent changes in eligibility renewals for Medicaid and CHIP programs
Clarifying Your Insurance Objectives
Before diving into specific products, it’s crucial to clarify what you want to achieve with your insurance. Are you looking to protect against unexpected medical expenses? Do you want to ensure financial stability for your family in case of premature death? By defining your objectives clearly, you can better assess which types of insurance are necessary.
For instance, many individuals are now considering long-term care insurance due to increasing life expectancies and the rising costs associated with healthcare. The average cost for a semi-private room in a nursing home is projected to exceed $100,000 annually by 2025. This highlights the need for proactive planning.
Identifying and Managing Risks
Once you have established your goals, the next step is to identify potential risks. This could range from health-related issues to loss of income or even the desire to leave a legacy. Understanding these risks allows you to tailor your insurance coverage accordingly.
Managing risk can be approached in several ways:
- Avoidance: Sometimes, simply avoiding risky activities can eliminate certain risks altogether.
- Reduction: For example, if you're concerned about long-term care needs due to family history, saving aggressively during your working years can reduce financial exposure.
- Diversification: Purchasing different types of insurance from various providers can spread risk and enhance coverage.
Financing Your Risk
Understanding your risk tolerance is essential when it comes to financing risk. Some individuals are comfortable retaining more risk themselves—this is known as self-insuring—while others prefer to transfer that risk to an insurance company.
In 2024, the insurance market has seen significant activity despite a slight decrease in deal volume due to economic uncertainties. Notably, there were 145 announced transactions totaling over $34 billion in deal value during the first half of 2024. This indicates a robust interest in enhancing insurance offerings amid fluctuating market conditions.
Ongoing Monitoring and Adjustments
Insurance needs are not static; they evolve with life changes such as marriage, children, or retirement. Regularly reviewing your insurance strategy ensures that it remains aligned with your current situation and goals.
Requesting annual policy reviews or performance illustrations can provide insights into how well your coverage is performing and whether adjustments are needed. Staying informed about changes in regulations or market offerings is equally important.
In conclusion, navigating the world of insurance can seem daunting, but by following these principles—finding a trusted advisor, clarifying objectives, identifying risks, managing those risks effectively, and monitoring your strategy—you can create a solid foundation for your financial plan. As we move through 2024 and beyond, remember that effective insurance planning is not just about protection; it's about peace of mind and securing a stable future for yourself and your loved ones.
Written By Ted Kerr
Ted Kerr is the Founder and CEO of Touchstone Capital, Inc., overseeing $300 million in assets for over 450 households nationwide. He also founded Touchstone Cares, a nonprofit that has donated over $1 million to charities, including Transformando Vidas in Brazil. A Westminster College alumnus, Certified Financial Planner®, and author, Ted is a marathoner, pilot, and second-degree black belt in Taekwondo.
