Why Is Insurance Important in Financial Planning?

Why Is Insurance Important in Financial Planning?

Why is insurance important in financial planning? Insurance plays a critical role in financial planning by providing a safety net for unexpected events. Having insurance means that your financial goals remain on track even if things go sideways and life throws you the unexpected.

By Mike Rogers, AIF®, Founder and President of 360 Financial

Mike Rogers is a fiduciary financial advisor with over 30 years of experience in the financial services industry as an investment advisor and financial planner. He founded 360 Financial in 1995 and holds series 7 and 63 security registrations with LPL Financial.

What’s the Importance of Insurance in Financial Planning?

In life, we should all expect the unexpected!

That’s where insurance comes in.

Depending on the insurance, it can protect your assets and income, and lower the risk of large financial losses. If you or someone in your family gets into an accident, falls ill or experiences a natural disaster, you’ll want to be covered.

Life insurance can offer financial security to your loved ones, ensuring they can still pay the mortgage and other bills if you pass unexpectedly. Ultimately, integrating insurance into your financial plan gives you peace of mind because now you know that you’ve proactively protected your family.

insurance is a safety net

Budgeting for Insurance

Budgeting for insurance is critical.

Insurance is an important part of your financial plan, which is why you’ll need to make sure it fits into your budget. Depending on how much you earn, you may be able to have more or less coverage. While you don’t want to be overpaying for insurance, you also want to make sure you’ve got a reasonable amount of coverage. 

That’s why working with an insurance broker that you trust is so important.

make sure you trust your insurance provider

Speak with an Insurance Expert You Trust

It’s important that you speak with an insurance broker that you trust.

You want to be able to relax knowing that you’ve got your family covered. But you also don’t want to be overpaying for insurance. Make sure you speak with someone who is reliable and trustworthy.

Some financial advisors are also able to help you with insurance. This can be a good route to go if your advisor works in a fiduciary environment. Then they’re obligated to provide you with the best possible advice rather than just selling you the highest cost product.

insurance protects your family
If you have a family, you’ll want to make sure you have the insurance you need for your family’s home and health as well as basic life insurance to cover a loss of income due to illness or death.

Common Questions about Insurance and Financial Planning

Why is life insurance important in financial planning? 

Life insurance is important in financial planning because it provides financial protection to beneficiaries (the people who inherit your money and other assets) in the event of the policyholder’s death (i.e. you). This ensures that your family can meet financial obligations and maintain their standard of living should the unthinkable occur.

This is particularly important for families where one member of the family is the main breadwinner. It may be important to you if you have a mortgage or other payments that would be impossible for one partner to cover should the other pass. 

Furthermore, life insurance can serve as a wealth transfer tool, enabling policyholders to leave a legacy for their loved ones or charitable causes. 

It’s not uncommon to hear of people losing their home when a spouse dies unexpectedly and they can’t afford to keep it. This is something that can be an added trauma on top of the death of their loved one. Ideally, life insurance will prevent this from happening.

How can insurance protect you from financial loss? 

Insurance can protect you from financial loss by covering specified risks, such as damages from accidents, illnesses, or natural disasters, ensuring that you’re not left to bear the entire financial burden of these unexpected events on your own.

Just make sure that you can afford the insurance and that you’re aware of the deductible on all your insurance policies. The deductible is the amount that you must spend out of pocket before the insurance policy pays for some or all of your claim. In addition, read the fine print to make sure you’re covered for the events that you’re most concerned about.

Can life insurance be used for financial planning? 

Yes, life insurance can be used in financial planning, not only as a means to provide for beneficiaries after the policyholder’s death.

What is the main financial goal of life insurance? 

The main financial goal of life insurance is to provide monetary security and support to beneficiaries in the event of the policyholder’s death, ensuring they can cover expenses, debts, and maintain their lifestyle without the policyholder’s income.

Essentially, with life insurance, you’re paying to prevent possible future financial difficulties for your loved ones when you pass. If your current assets would not be enough to ensure your loved ones are taken care of, or if you have substantial liabilities like a large mortgage, then life insurance may be something for you to consider. 

And if you’re a bit of a worrywart, having life insurance means you’ll probably sleep much better at night. Finally, if you work in a high-risk profession and have dependents, then life insurance is likely the only way you can be sure your family will be taken care of should something happen to you on the job. 

Why is insurance planning and risk management important? 

Insurance planning and risk management are important because they are a proactive way to mitigate potential financial losses from unforeseen events. They ensure stability and peace of mind for policyholders and their families.

While you can’t get insurance to cover ever single potential future problem, you can cover the basics.

Life insurance and health insurance are common tools that allow you to protect your family and ensure they’re taken care of no matter what life throws at you.

Connect with a Financial Advisor Online or In Person

speak with an advisor

If you need a wealth management team to help you pursue your big-picture goals, we recommend scheduling a call with a financial advisor at 360 Financial.

360 Financial is one of Minnesota’s best independent wealth management firms with over 30 years experience. We work with clients in Minnesota and across the US. If you’d like to work with a team that always puts your best interests first and is committed to helping you create a lasting legacy, please get in touch. 

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About the Author

Mike Rogers

Mike Rogers

Mike Rogers is the founder and president of Minnesota-based financial advisory firm 360 Financial. As the founder, Mike’s priority is that 360 Financial always serves the clients with empathy, integrity, and honesty. This customized, client-centric approach allows the firm to help clients decipher between the things they can control and what truly matters.

In other words, Mike understands that money is not the end-all-be-all; instead, it’s the “how” that fuels the “why” to the question: “What’s important to you?”

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This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state%u2019s insurance department for more information.