Insurance planning is one area of the financial planning process that is all about protecting yourself, your family members or your assets from any financial risk due to unexpected events. A big part of this protection can be done by creating a safety net through insurance. To put it simply, insurance helps cover costs when life throws curveballs at you and your loved ones.
What is Insurance Planning?
Insurance planning is the process of choosing insurance policies that provide financial protection against unexpected losses. It involves identifying the risks that may impact your life and selecting insurance policies that cover those risks so that neither you nor your loved ones are financially burdened due to unfortunate circumstances.
Benefits of Insurance Planning
Any well-rounded financial plan must include an insurance plan as it offers benefits beyond financial protection including portfolio diversification, tax benefits, and predictability to strengthen your overall financial plan. Some of the key benefits of insurance planning include:
- Financial Security
The biggest benefit insurance provides is financial security. This means that your insurance shoulders any loss you may incur due to unforeseen circumstances. For example, life insurance protects your spouse or children from the potentially devastating financial losses that could result if something happened to you. Disability insurance can provide financial assistance if the primary breadwinner in the family is unable to work because of an illness or injury.
- Coverage Against Diverse Risks
Insurance provides financial protection against a variety of risks. Some types of insurance include:
- Life insurance
- Critical Illness insurance
- Disability insurance
- Health & dental insurance
You may also opt for travel insurance when you’re planning a holiday or choose a more exotic insurance like a hole in one insurance, depending on your lifestyle. Your financial planner will recommend the insurance policies you need after conducting a thorough analysis of your income, lifestyle, and financial goals.
- Tax Benefits
Certain insurance plans may qualify for tax deductions depending on where you live and your individual circumstances. However, Canada’s tax laws are complex, and you will need a qualified tax professional to help you navigate them.
If set up correctly with a named beneficiary, the beneficiary of a life insurance policy typically receives the death benefit without having to pay income tax on it. This helps loved ones financially when they are in a vulnerable state and emotions are running high.
- Predictability and Stability
Investments can vary in value over time depending on market conditions and a whole bunch of other factors. Life insurance policies, however, do not change significantly. This means that your financial plan has one factor that remains predictable and stable, and you can rest assured that your legacy is safe.
- Estate Planning
Insurance can play an important role in your estate plan in a few different ways. Life insurance can help cover your final expenses as well as other costs such as taxes and probate fees which can chip away at the inheritance you wish to leave your beneficiaries. It can also help with the succession of a business or leaving money to a charity upon your death.
- Peace of Mind
Most of all, insurance policies provide peace of mind. You know that you are financially protected against adverse events and will not lose your hard-earned money.
Choosing Insurance Coverage
Choosing the right insurance for you and your family is critical to ensure optimal protection. You need to take into account your income & expenses, assets & liabilities, your financial goals and your dependents’ needs.
Conducting a thorough insurance needs analysis will help you identify any gaps in your plan where you may be exposed to financial risk. Taking into account any existing coverage and how they work will help you determine the appropriate type and amount of coverage you may need.
Financial and Insurance Planning with Kara Day
Insurance can be complex to understand in terms of what they cover and the circumstances under which you can expect a benefit to be paid out. Kara Day has the necessary expertise, qualifications, and experience to help people with their insurance planning along with meeting their financial goals.
She demystifies complex issues so you can make informed decisions about your future. Book your free, no-obligation information session or ask a question by getting in touch. Get started on the path to protecting your financial future today!