Wealth Management Issue - Two - Insurance - 3 Minute Read

Insurance

Insurance is a unique financial tool. In addition to allowing protection of assets from loss or damage, it can also be used to solve both personal and business financial problems.

For example, life insurance alone can be used for liquidity for taxes, funds to transfer a business, replacement of a charitable gift, reduction of debt, and equalization of inheritances, just to name a few.

When it comes to your wealth protections strategies an Insurance Efficiency Review is in order and should be incorporated into your overall risk management plan, the Review should cover four types of insurance.

These are life, disability, long-term care, and liability. All four types need to be assessed from three distinct vantage points:

adequacy of coverage,

appropriateness of policies,

and cost effectiveness.

Examples of common issues we find when working with prospective clients.

• No guiding plan and or principle as to how death benefits would be used if a family member or spouse passed away.
• Failing to analyze the impact of long-term care/disability issues and by default “self-insuring”.
• Increases in wealth/assets has caused liability insurance to be insufficient.
• Failure to evaluate cost, adequacy and type of insurance coverage on a regular basis.

Common questions we may ask when taking clients through our planning process:

• How is your life insurance coordinated with your estate plan? What types of life insurance do you have?
• Tell us about your plan for addressing disabilities and or long-term care needs and how you determined it was the best plan for you.
• When did you last validate that your liability insurance coverage was commensurate with your wealth?
• When was the last time you evaluated the value (cost) of your insurance coverage?

This intent of the insurance interview is to uncover issues that may have beenoverlooked or need updating as circumstance have changed materially since thelast review.

Your goal along with that of your financial advisor is to simply collect information to take back and analyze. Only after this will and should your financial advisor “Wealth Manager” return with a recommended solution or a recommendation to meet with other specialists or the client’s tax or legal advisors. Your Wealth Manager assists with coordinating tax and legal advisors, managing the big picture, investment details and producing a Wealth Management Plan.

Any opinions are those of Ken Haycraft and not necessarily those of Raymond James.