The Most Important Insurance Your Clients May Not Have
The 1969 Woody Allen film, Take the Money and Run, is one of my personal favorites. The most memorable scene is when Allen is captured after escaping from prison and his punishment is solitary confinement with an insurance salesman.
Not many people are interested in discussing their need for insurance. It’s certainly not an exciting topic (nor is investing for some). For many, discussing mortality and disability risks are unpleasant subjects. In addition, most people don’t like being “sold” something. There are so many different types of insurance (and from many different companies), that many are left wondering, “Do I really need this? Is it worth the expense? Am I wasting my money?”
Unfortunately, ignoring those issues often leads to failure to address important risks.
The reality is that insurance protects us from worst-case scenarios – events that could have catastrophic consequences to our families. While it may not be exciting, insurance plays a vital role in the financial planning process.
Perhaps the most important message of my book, Your Complete Guide to a Successful & Secure Retirement, is that having a well-designed investment plan is only a necessary condition for investment success. The sufficient condition is integrating it into a well-designed life and financial plan that includes estate, tax and risk management (insurance of all kinds) planning. There are many important non-investment risks to consider, such as mortality, disability, the need for long-term care and even longevity (living longer than expected). If these risks are not integrated into the overall financial plan, even the best investment plan can fail.
Analyzing the need for life, health, long-term care, disability and “personal lines” insurance (property and casualty products), is a critical part of the financial planning process. All types of insurance should be considered, and all existing policies should be reviewed annually by an independent risk management specialist to ensure coverage is adequate but not more than required.
As discussed above, despite its importance, insurance risks are often overlooked. And it is my experience that one of the most overlooked risks is the need for excess personal liability insurance – coverage provided by an umbrella policy.