Insurance is like a safety net for your whole life — from assets like your home and car to your pets’ health and even your own. However, insurance protects something else, too: your finances. But if you want to shield yourself from unexpected events that could derail your biggest money goals, you should know which policy types to consider and how they fit together.
Here’s a look at insurance and its role in financial planning.
Why Insurance Matters
Wondering why insurance should be part of your money plans? Here are just a few reasons:
Risk Management
Insurance helps manage the financial risks from unexpected events such as illness, accidents, natural disasters and death. By transferring these risks to an insurance company, you can protect yourself and your families from potentially devastating financial losses.
Asset Protection
Insurance can help protect assets such as homes, vehicles and personal belongings from damage or loss. This protection is essential for maintaining financial stability and ensuring that you can recover from unexpected events without depleting your savings.
Critical Costs
An insurance policy often covers costs you can’t avoid — for example, health care. Because you would have to find a way to pay for these things anyway, it makes sense to plan ahead and build emergency preparation into your overall financial strategy.
Income Replacement
Income is one of the simplest parts of your money plan — but what happens if you’re injured or otherwise unable to get that income? Insurance can help in some of these situations, helping you meet key obligations while you get back on your feet.
Budgeting
It’s important to choose policies that will protect the right stuff at the right prices. To do that, you’ll need to consider how deductibles, fees and long-term coverage play into your strategy. Fortunately, if you plan ahead, it’s easy to work insurance into your overall budget.
