Piggybacking off my last blog post about reviewing your budget, one of the most commonly overlooked items in a budget is one’s insurance costs. Insurance is a needed expense for many, but an expense that is seldom reviewed and re-evaluated if you are not working with someone who specializes in this type of advice. I would recommend reviewing your insurance at least yearly. What insurance policies do you currently carry? Is there still a need for those insurance policies? Is there a better premium or coverage option out there? Let’s discuss two that have the most room for improvement:
Life insurance. I often recommend life insurance coverage, but there is no blanket advice for how much is needed, every scenario is different. I firmly believe that with life insurance, it should always be treated as insurance. What I mean by that is, insure against a tragedy or financial loss. In most cases, I would never consider life insurance as insurance and an investment component. Those products, such as whole life, or universal life, indexed universal life, and variable life types are typically expensive insurance vehicles that end up rewarding the agent that sold them more than the client who purchased them. It’s more cost effective to insure with term life insurance products and review them frequently. Our goal is to eventually self-insure (cash in the bank/investments) to cover any life tragedy, therefore no need to continue to pay for an insurance policy. Also, avoid the expensive “riders” on policies that are unnecessary.
Disability insurance. I again often recommend having disability insurance, and again every scenario is different. Disability insurance can be confusing and making the wrong selection can cost you 10s of thousands of dollars over your working years. If we combined the overpaying for insurance with the foregone investment opportunity of those dollars wasted, that can add up to additional years working instead of enjoying retirement. I recommend sitting down with a professional who understands your profession and your life requirements and getting a policy that works best for your scenario. Re-evaluate the need for disability both personal and business-overhead annually. Our goal for disability insurance should be to self-insure as well. Also, reduce or re-evaluate insurance as your business changes. For example, if you bring on an associate, your need for business overhead insurance could drastically decline. Just bought a new building and have a loan on that building? Your need for disability insurance or business overhead insurance could drastically increase.
I am happy to discuss any and all insurance needs with you. Please call me at 913-681-9155 or email at taylor@engageadvisors.com.
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