Another important part of financial planning is identifying and managing the potential risks that can impact your finances.
The value of insurance is that it’s a cost-effective way to mitigate or share the frequently overwhelming costs of various risks. Let’s spend a few moments looking at the types of risk you might want to insure against:
What used to be called “health insurance” has actually been replaced by health-care plans. Most plans provide basic coverage for common medical expenses, such as doctor visits, preventive care, diagnostic tests, hospital and extended care, emergency services, and prescription drugs.
Auto insurance has two main components: liability insurance and insurance for property damage. Liability insurance provides compensation to persons who would be able to sue you for personal injuries, medical payments, loss of earnings, or damage to their property. Property damage insurance includes collision and comprehensive coverage, which compensate you for damage to your car caused by another auto, or by such things as fire, theft, and vandalism.
Life insurance offers income replacement to your survivors. It can provide an income-tax-free death benefit, and can be used to pay for funeral expenses and even medical expenses of a last illness. MMBB’s Comprehensive Plan provides term life insurance coverage. Term life offers coverage for the length of the policy, or in the case of an employer until your last day on the job. Whole life insurance offers a death benefit for your entire life, as long as you pay the premiums.
For many of us, our most valuable asset is our home. The most common type of homeowners policy in use today covers a variety of risks that can cause damage to your home and personal property, medical payments for injuries to occupants and to persons injured by accident while in your home, and loss or theft of personal property.
Liability insurance is often your last line of defense against potentially devastating claims for things over which you may have little or no control. It’s often called umbrella insurance because it’s carried over all other liability insurance and usually adds $1 million or more in extra coverage to your homeowners and automobile liability policies. Coverage is provided for you, your spouse, and any relatives living in your household and insured by your primary policies.
What if you couldn’t work for an extended period of time because of an injury or illness? How would you replace your earnings? Who would contribute to your retirement savings accounts or educational funds? Disability income insurance benefits can be used to preserve your independence, maintain your lifestyle, give you time to recover, provide a chance to retrain for another job if necessary, and conserve your assets and savings for you and your family. MMBB’s Comprehensive Plan provides disability insurance.
Long-term care insurance pays benefits if you need extended care, such as nursing home care. Like other types of insurance, long-term care insurance protects you against a specific financial risk—in this case, the chance that the need for long-term care will wipe out your life savings.
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