A key component of any financial plan should be planning for unexpected events that may prevent you from meeting your future financial goals. This is known as risk management planning. Each year many people face financial disaster through premature death, disability, or a prolonged illness. As part of your financial plan, we review your current insurance coverage for potential shortfalls. Where appropriate we make specific insurance recommendations to better protect you and your loved ones from financial catastrophe.
The purpose of life insurance is to lessen the financial impact associated with the death of a family member, particularly the head of the household. By planning for these situations, you have the opportunity to preserve your existing family assets and also replace the income that would have been earned. Life insurance can also bring peace of mind, knowing that these risks are covered.
A life insurance analysis should ensure that when a death occurs in your family, there is sufficient income and capital to cover the cash flow needs for the surviving family members over the entire planning period. When you are young, a major reason for having life insurance is to provide financial protection for your dependent family. Without the continued benefit of your income, your family may not be able to afford their ongoing expenses for housing, transportation, food, clothing, etc. There may also be additional expenses for childcare. College education and retirement needs will also continue to exist.
Each year, approximately one in eight people become disabled. Unfortunately, many of them have to worry not only about their health but also about replacing their salary. Disability insurance can make a difficult time financially manageable. Most people are provided disability insurance through their employers, but the self-employed, the professional, and the new business owner are challenged with finding adequate disability coverage in the type and amounts they need.
Long-Term Care Insurance
Most people envision themselves living a long life. They invest for a financially secure retirement and plan to spend those years doing the things they enjoy most. As part of your financial plan, it’s important to understand how needing long-term care may affect your assets, your family, and your future. The cost of an uncovered long-term care event can range from tens of thousands to more than a million dollars, so it makes financial sense to manage that risk.
The longer you live, the greater the likelihood that you may require long-term care. Although people don’t want to think about becoming frail or ill, if they haven’t planned for this eventuality, the consequences for their family and their finances could be catastrophic. According to the U.S. Department of Health and Human Services, 70 percent of people who reach age 65 will require some level of care services at some point in their lives. Keep in mind that long-term care is custodial care and is not covered by Medicare.
The costs associated with long-term care are significant. According to the Genworth 2015 Cost of Care Survey, the annual median national cost of care in 2017 was $97,500 for a private room in a nursing home and $46,000 for home care. In 20 years, that will increase to $160,000 for a private room in a nursing home and $80,000 for home care. It can take decades to accumulate the assets you’ll need to retire comfortably, but just a few years of paying for long-term care may threaten a lifetime of savings.
A long-term care insurance policy provides an income stream to pay for future long-term care expenses. It helps ensure that your financial plan executes the way you intended, with enough money for your spouse to live on and assets eventually going to family members or charities rather than the health care system. In short, a long-term care policy protects your family, your finances, your quality of life, and the ability to maintain your independence.
*Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network®.