Thursday Trim the Trash Time: August 24, 2017
Your Insurance Advisor should care about you…Period
There are many aspects of the financial industry that are tangible and exciting. Saving and investing your money is fun because you get to watch it grow. Buying a home is exciting because you now have a place to live and it is yours or will be eventually. Buying a stock can be exhilarating as you watch the highs and lows. Buying insurance, however, doesn’t quite hit the button like these other things. I have said many times that people often think of insurance as a dirty word. It is about as fun to talk about as taxes or an annual colonoscopy. No one brags about a “cool” whole life policy around the Christmas table like they would a hot stock tip. I know for a fact no one looks at their insurance advisor like they would Leonardo Di Caprio in The Wolf of Wall Street. I have mentioned before that adequate insurance is a very important part of any financial plan. I would say that it is even more important than those fancy investment accounts and even your family home. My reason for that is simple, nothing in life matters or can function if you are not here, or can’t make a living. Insurance is what bridges that gap. It is a concept rooted in security. Your insurance advisor should be able to explain to you the benefits of having insurance. They should also do their due diligence in making sure you not only obtain insurance but the right insurance for your goals and needs. In this post, I will go over the steps an advisor should take in determining which insurance is right for you.
1) Determine the Need
Finding the need for insurance shouldn’t be hard for the competent advisor. How it should be done is by asking a series of probing questions. Your advisor should know if you have a family and how big. If you own a business and the nature of its financial plan. If you plan on leaving a legacy for your family or favorite cause. If you have debts tied to others. If you wish not to be a burden on your loved ones while they mourn your loss. If your insurance coverage through work is inadequate or non-existent. If you fear how you would make do if you got hurt or sick. Understanding your goals and fears is what insurance is all about. They have to delve deep to find out what makes you tick and what is of the most concern for you in your life. Insurance is all about love and fear. You love certain things in life (your family, your friends, your home, your lifestyle, your sanity) and you fear what would happen if something jeopardized that love. What can jeopardize that love is the lack of money and the ability to care for those you love including yourself. Your advisor has to have a deep conversation to know exactly what you care about most and then help you take steps to protect it.
2) Your Budget
My website is called Budget Boss for a reason. All financial planning stems from the use of a budget. Making sure you have the right insurance is key to this as well. Your budget determines how much you need to live on every month so therefore how much you would need to cover if you can’t work. Your budget determines what type of investments you have and therefore what type of coverage you need to protect those invests. Your budget determines how much of a premium you can afford each month and that is vital to make sure that you are not over or under insured. Being both over and under insured are damaging. Being over insured can damage your monthly cash-flow. Being under insured can damage you when it comes time to make a claim. It is the job of your insurance advisor to determine what the right amount of insurance is, that covers you adequately and also fits your budget. This is not a step that should be taken lightly.
3) How it fits with your Financial Plan
As I mentioned in the first paragraph, insurance is a vital part of any comprehensive financial plan. Having the right insurance is important for several reasons within your financial plan. It helps you maintain retirement goals if you are unable to work. It helps you maintain one of your valuable investments, your home, should you not earn an income or die. It allows for debts to be paid or erased off should the worst happen to you. It will allow your families educational goals and lifestyle goals to continue should you experience a traumatic event. It also can be a vital part of a well-diversified portfolio provided guarantees that most other investments cannot. For someone needing or wanting a conservative investment to go along with other investments, insurance fits that mold. It is the duty of you insurance advisor to explain the role insurance will play in your overall financial plan and its one that should not be passed over.
Insurance gets a bad rap for many reasons. Many people think of it as a money pit like home or auto insurance that you throw money in and none comes back out. What needs to be understood about insurance is that it is not in the insured person’s best interest that it pays out. That seems obvious because that means you are sick, injured or dead. It is also not in the best interest of the insurance company that it pays out either. Insurance companies don’t make money by paying out claims, seems pretty simple. The purpose of insurance is never to make someone rich, it is to maintain the standard of living when times get tough. This concept is lost on many who think it is just a lottery ticket for someone to cash in when you die. That could not be further from the truth. It is the job of the insurance advisor to explain to you the importance of your own health and your own life. This is where caring comes into play. If this advisor truly cares about insurance as a concept, they will, in turn, care for you and that your family is taken care of in case of an emergency. It is all our natural instincts to seek out and protect love. It is also an instinct to avoid and eliminate fear. Your financial plan should be sound enough to accomplish both.
Thank you for reading this week’s Boss Blog. If you have any questions about how insurance should fit into your financial plan please do not hesitate to contact me at joe@budgetboss.ca. Don’t forget to tune in tomorrow for my live recap of Financial Advisor Week here at Budget Boss. Join in at @joebudgetboss on Facebook. Have a Great Day Friends!
“I’m a big crier in general. The right life insurance commercial will take me out for a couple of days.” – Ike Barinholtz
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Joseph James Francis is a Financial Advisor. You can find him on various social media platforms and at www.budgetboss.ca