Financial planning includes your monthly budget, savings goals, and long-term wealth. Building financial stability is possible even on a low income, but you have to know how to leverage your current assets to their fullest advantage. A major component of strong financial planning is risk management. You may not be able to always foresee or prevent problems, but you can always prepare for them.
Insurance is built to protect you in the event of unfortunate circumstances. Life insurance is unique in that it presents financial opportunity to you. As you think about what level of protection you buy, it’s good to ask what you get out of your policies as well as how much you contribute.
How Much Coverage Do You Need?
Financial planning allows you to structure your savings and spending to meet current needs and short- and long-term goals. Saving up for a vacation, for example, may be a year-long goal, but planning for retirement lasts decades. The right level of coverage allows you to balance contributions, your premiums, with your coverage. And this coverage should be relative to your general level of risk.
If something happens, like you sustain an injury and now have a disability, is there enough protection in place to help you recoup the financial losses? While some people find insurance a waste because they’re in good health and monetary standing, they fail to see the ultimate purpose of the policies. No one gets insurance because they have an immediate problem. They buy coverage to ensure they have access to funding they need after a negative event happens. This could be a medical diagnosis, workplace injury, car accident or even death of a spouse or parent.
Assessing Your Risk Levels
Think about your general, occupational, and medical hazards. You should structure your policies around these to provide adequate benefits to you and your beneficiaries. How much money would you want your children to have if you died next year? What are the necessary steps to take after a car accident and how much coverage do you need if you are in a collision and have to pay for damages?
Someone with a medical history of cancer, diabetes, heart disease or another condition may need access to medications and specialists, which require a higher health insurance premium. In exchange for paying more, their deductible drops and they gain access to the care they need at a more affordable rate sooner. You may want to look into working with a financial planner to help you determine the most appropriate insurance levels. It’s always best to go over potential investments with an unaffiliated third party; agents are always going to push their products, so work with someone who is in this for your best interest over a sale.
Taking Advantage of Your Insurance
Buying a life insurance policy now could help you cover emergencies later. You can also use life insurance as part of your investment portfolio. Whole and universal life insurance policies generate wealth through a cash value over time. When you cash out through a life settlement, the money is yours to spend however you want. Just keep in mind there are taxes to consider, another important element of financial planning. You can read all about life settlement taxation in a detailed guide.
Building the Right Budget
Premiums vary by lender, state and individual, but a free market means consumers have the most power. Budgeting ahead for your coverage can give you the greatest freedom when it comes time to buy a policy. Financial advisers may be able to help you sort out your budget and they can also help you plan for and structure goals, build savings, and ensure you have enough money to in comfort.