Insurances Planning

Insurance Checklist

1. Assess Personal Property for needs: How will you allocate the risk of loss or damage to your most prized possessions? Your Phone, Cars, and Home are often worthy of insurance.

2. Assess Liability Needs: By Home, I mean “place of residence.” Renters’ Insurance (and Homeowners’ Insurance) does more than protect the place where you keep your stuff and the things inside. They also provide Liability Protection for you in the unfortunate event that you are found responsible for causing injury to another person, whether at home or outside your residence. Your Auto policy, similarly, protects you against more than replacing your vehicle. I strongly advise Auto and Home (or Renters’) liability limits that work with an Umbrella Insurance Policy to provide you with seamless liability protection of 20x annual income or greater protection amounts according to your personal risk preferences.

3. Assess Income Protection: After Property & Casualty Insurances, and Umbrella Liability Insurance Policies are in place, How are you paying the premiums? 99/100 the premiums are paid from current cashflow generated from your income earnings. You are a cash machine and should be insured against damage or loss, no different than your property and casualty coverages. Unfortunately, Disability Insurance is not available to everyone. If you work a rugged job where you routinely lift more than 60 lbs, there is no chance to affordably find Income Protection from Disabilities caused by illness, injury outside of work, or prolonged wear and tear. If you have Disability Insurance through work, that is a great starting point and will help you explore the value of Income Protection. Once you understand the value of Disability Insurance, you can align the value of your Income Protection coverage with your risk exposure preferences to buy what you feel comfortable with for peace of mind without overtaxing your budget.

4. Assess Long-Term Care Insurance: Your age may dramatically affect your level of concern toward your Long-Term Care and the associated costs. But even if you are young, I encourage you to consider who may end up on the hook financially for the care of your parents. Often, it is easier for young siblings, or other family members, to negotiate splitting the premiums of Long-Term Care Insurance for an elderly relative than it is to haggle for reimbursement of the actual care costs down the road when people are emotionally drained and physically exhausted.

5. Assess Income Replacement: If you have kids, or a mortgage, or a business, or other debt or obligation that you would like to see through to completion, whether you live to see it or even in your absence, then Life Insurance should be considered next. Term Insurance offers affordable coverage against catastrophic loss for a specific period of time. Depending on your age and the present stage of your career earnings potential, Term Insurance can affordably provide Income Replacement Protection for your family. 10x-30x Annual Income for the primary income earner is commonly considered, while generally, about half that coverage amount is available for additional protection from the financial impacts of the death of other family household members.

6. Assess Legacy Value: What is the intention of your legacy? Legacy offers you the chance to make a final statement that can be incredibly powerful when handled with deliberate intention. Life Insurance is an immediate means to purchase legacy value that can be used to enhance the lives of future generations of your family, or else to support charities or other organizations of your interest. Guardian Mutual Life Insurance Policies include an additional 1% death benefit, above and beyond the policy purchased, to support charitable giving. If you don’t already have a charity in mind (and this designation can be changed at any time in the future), I recommend the Marine Toys for Tots Foundation, 18251 Quantico Gateway Dr. Triangle, VA 22172. EIN: 20-3021444.

7. Assess Liquidity needs: This is one example where Whole Life Insurance can be quite useful. As opposed to an investment or brokerage account which will target more aggressive returns in exchange for market volatility, Whole Life Insurance policies can provide relatively worry-free access to a lump sum of capital even when the stock market tanks, for any reason, and provide the cash in about 48 hours. This characteristic is especially handy for those ultra-aggressive individuals who strategically utilize this “war chest” feature to “buy the dip” in the market and compound their appreciation during the recovery.

8. Assess Permanent Insurance options: Permanent Insurance includes Whole Life Insurance, Universal Life Insurance, and all other Life Insurance that never expires and will pay the Death Benefit when you pass on. Because Permanent Life Insurance will pay the death benefit eventually, the mortality costs associated with permanent Life Insurance mean that the earlier you purchase this insurance, the lower the price and the greater the value for capital appreciation. I also encourage early permanent insurance policies to protect against the risk of loss of insurability due to illness or injury (or future poor health from any other cause) that might result in no available insurance or unaffordable insurance or insurance with exclusions being the only available options in the future.

9. Assess Supplemental Insurances for specific concerns: Are you particularly concerned about getting cancer? There are Cancer and other illness-specific insurance coverages that you might consider. There are Accidental Death & Dismemberment policies that may appeal to individuals who, maybe travel frequently, or are otherwise concerned about the risk of unintentional injury for whatever reason.

10. Assess Estate Planning Documents: Review and update wills, trusts, business buyout agreements, living wills, powers of attorney, and other essential documents. I recommend consulting with an attorney for a customized experience, but anyone can get started with FreeWill.com to gain some exposure to estate planning documents.

This checklist empowers you to navigate the insurance preparations necessary to optimally protect you and yours.