What You Need to Know Before Buying Insurance

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umbrella insurance shopping guide

By Matt Mormino, CFP® and Greer Smith, CFP®

Insurance is one of the most overlooked elements of financial planning. But make no mistake—it’s often a necessity. That said, choosing an insurance policy—life, homeowner’s, business, critical illness, etc.—can feel like a minefield, full of loopholes, risks, seemingly illegible small print, and general confusion.

If you have a family or assets of any kind, buying a life insurance policy that suits you and your situation can help safeguard against many of life’s potential curveballs or unexpected complications.

According to a study conducted by Insurance Barometer, 85 percent of consumers agree that most people need life insurance, but only 62 percent say they have a policy in place. And unfortunately, it’s not as simple as it may seem. Insurance simply transfers risk in exchange for premiums and with so many aspects of your life to consider, life insurance is just the tip of the iceberg.

Insurance Shopping Checklist

To get a better handle on the risk management portion of your financial plan, we’ve compiled a checklist of items to keep in mind when shopping for insurance:

  • Understand your need. Determine the obligations you would like to cover if you are not able to work due to a prolonged illness or death. Typical things to consider are lost income, outstanding debt, and education costs. Evaluate how much you are comfortable paying if a tree falls on your house or your car is damaged. Identify how much of your wealth or future earnings are at risk if you are sued and found negligent.
  • Take inventory and document the areas in which you do and do not need coverage.
  • Break down each potential insurance policy and decide on the essential features you’ll need from each product. For example, if you need life insurance, would you also like critical illness coverage included?
  • If you’re interested in buying insurance for your business, conduct a full risk assessment that outlines all major liability concerns.
  • Using shopping comparison sites to get a feel for the insurance policies available to you, the level of coverage they offer, and their prices. Make a note of the policies that look the most appealing.

Before you delve into the mind-boggling world of insurance policy and price comparisons, underwriting, rules, and regulations, it is important to understand that there isn’t one perfect policy for everyone.

There are many insurance products out there with a dizzying array of options. As crucial as insurance is, the advantages that different policies offer are only valuable if they work for you and your personal circumstances.

With that in mind, you shouldn’t be hasty to sign on the dotted line—buying insurance of any kind requires planning, patience, and confidence in your choices.

Insurance is a critical financial planning tool, but it must work for you, or it won’t work at all.

Consult a Trusted Third-Party

Whether you’re looking for a suitable life insurance policy, better contents coverage on your homeowner’s insurance, or health care coverage, seeking the services of a trusted, a knowledgeable third-party will help to ensure you commit to products that will offer the best protection for you, your assets, and your family.

You should always conduct personal research at the start of your journey to understand the kind of insurance coverage you need and why you need it. But when it comes to evaluating specific policy options, professional consultancy is advised.

Recruit a Personal CFO

Buying insurance policies can be an emotive experience, as it forces you to contemplate things that could potentially go wrong in your life or your business; it also makes you put your mortality under a spotlight.

When you begin to decide on the coverage you need, it’s easy to become confused or conflicted, opening you up to the risk of making snap decisions or poor judgments that could end up being detrimental.

A Personal CFO will not only be able to guide you through the process step-by-step, but they will also help you make informed decisions based on your needs and circumstances.

Studies from the Kaiser Family Foundation found that 45 percent of uninsured adults in the United States attributed high costs as the reason behind their lack of coverage. Protecting yourself against life’s eventualities is important nonetheless, and with the right advice, you can find affordable coverage that suits your needs, regardless of your financial circumstances.

Just dipping your toes into the choppy waters of buying insurance may be enough to make you sweat. But conducting personal research, asking the right questions, and consulting a professional third-party or Personal CFO will not only make the process far less stressful but also prove priceless to your financial future.

If you’re currently looking for a Personal CFO who not only knows the insurance market but also offers the kind of tailored advice that will help you secure the brightest possible financial future, please get in touch with us—we’d be happy to help.

Matt Mormino, CFP® and Greer Smith, CFP® serve as advisors at Brighton Jones.

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