PERSPECTIVES Risk mitigation is an important part of wealth building strategies Typically, when you get together with a financial planner or fiduciary, the conversation focus is on investing, budgeting, or smart money moves. What rarely gets considered is how to best hedge your bets against risk of the unknown. While some still cringe when they hear the term insurance salesman, risk mitigation has come a long way from the days when it meant someone was likely to corner you at a networking event with an aggressive sales pitch. Today, there are lots of options that make sense for your exposure concerns. Homeownersâ and collision insurance are non-negotiable when banks still hold the note. Health insurance is critical if you can afford it. But what about the other stuff? The answer to this one is, âIt depends.â Life, disability, dental, umbrella policies, etc. can be a necessary evil. Or, they can be completely unnecessary. Your personal circumstances will dictate what makes sense. Insurance is changing
FINANCIAL FIGURES
You want to make sure youâre not over-insured. Still, itâs important to be covered so youâre not financially crippled when surprises happen. Most donât understand contractual language. Itâs important to know what youâre buying. Price shopping makes little sense when cheaper means your claim is denied when crisis hits.
By Michael Shelton
For example, disability insurance has two ways of offering contracts. The ideal is own-occupation coverage. This means youâll get paid if you canât do your existing job. It costs more than any-occupation coverage. The latter means if youâre a doctor who can still bag groceries, youâll get nothing from the policy that youâve paid on for years.
Executive Summary: Itâs not the policy thatâs important, itâs the contract.
Life insurance is another great example. You can now get coverage that includes disability, life, and long-term care. This kind of contract kills three birds with one stone. Accelerated benefit riders let you use the death benefit to handle health needs you have while youâre alive. Paying out when you die is a secondary benefit if you donât use money for chronic, critical, or long-term care needs. That makes even single people with no children good life insurance candidates. Accumulating wealth can be as much about ensuring (or insuring) youâre not over-exposed when crisis occurs as it is about smart investing. Knowing where youâre vulnerable and what you need to do to reduce risk can make a big difference for your financial security. Itâs not the policy thatâs important, itâs the contract. Make sure itâs written to your needs. If you donât know what that should say, it makes good financial sense to find someone who does to act as your advocate.
Michael Shelton is a financial retirement counselor. Reach him at michael@discover360 Financial.com vbFRONT.com / OCTOBER 2021 u
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