Broker Check

Part 11: Protection Options

September 20, 2021

Last time we reviewed the foundational financial concept of Protecting.  We now turn our focus to the various Protection Options, including insurance and legal documents.  Please note that this information is generic in nature and should not be construed as recommendations.  Your personal situation must be taken into account before implementing any protection strategies.

Car Insurance

Car insurance is legally required, so it’s not hard to get people to obtain it.  But often, the focus is on getting the lowest car insurance rate possible.  This may save you money in the short term, but it could leave you open for risk down the road.  Getting the lowest car insurance rate could mean you have the absolute minimum amount of coverage, which may be insufficient if you’re at fault in an accident that totals someone’s expensive new car and injures multiple people.  For this reason, consider obtaining more than your state’s minimum requirements.  The car insurance industry is highly competitive, and it makes sense to shop around for a better rate at least every 5 years or so.  When you compare your current coverage with a new quote, just make sure that you’re comparing apples to apples and getting at least the same coverage, if not more.  If you’re not sure what to look for, work with a licensed, experienced, property & casualty insurance agent that is able to compare among multiple insurers.

Liability Insurance

Liability insurance, also called an umbrella policy, will protect you and your family at a higher level of coverage for anything that you could be found liable for (an injury on your property, accident that car insurance won’t fully cover, etc.)  These policies can protect up to $1,000,000 or more and are relatively inexpensive, usually between $250-$500 per year.  In addition, if you’re a business owner or self-employed, it’s important to understand all areas of potential liability and protect against them.  You can obtain this coverage through your property & casualty insurance agent also.

Disability Income Insurance

Disability income insurance protects your income if you become disabled and are not able to work.  It’s paycheck replacement insurance.  Some policies cover you if you can’t do your current job, while others will only cover you if you cannot perform any job.  In my experience, disability income insurance is one of the least purchased coverages, but one of the most important.  Think of the financial burden placed on a family if the breadwinner cannot work for a prolonged amount of time.  That person still has to eat, may need to be taken care of by others, and likely has increased medical expenses.  All of that with a complete loss of that person’s income.  If a family is dependent on an income, then disability income insurance must be considered. 

Long-Term Care Insurance

As the population is living longer due to medical advancements, there is a greater need for long-term care (assisted living facilities, in-home nurses, nursing homes, etc.).  Depending on where you live, a long term care situation can cost well over $100,000 per year.  What one may have worked all their life for can be gone within a few short years.  Long-term care insurance has evolved recently and there are more options to obtain this protection.  If you are between your early 50’s to early 60’s, you should consider this coverage.

Life Insurance

We frequently see fundraiser benefits to help the surviving family members when a young father passes away suddenly or a mom loses her fight with cancer, to cover burial expenses, to set up college funds for the kids or to help pay outstanding medical bills.  There’s nothing wrong with these, but I can’t help but wonder if only the person had a sufficient amount of life insurance how that could impact the family now and in the future.  An unexpected death of a family member is tragic and there’s an obvious grieving process.  On top of that there shouldn’t be a worry and a fear of “How am I going to raise my family?  Will I be able to stay in my house?  I’ll never be able to help the kids pay for college.”  Let me be clear: Money cannot replace the loss of a loved one.  But it can reduce the fear of losing even more and provide some level of stability, especially when children are involved.  I’ve seen it firsthand and more than once.

There’s a key takeaway to all types of insurance:    You don’t need it until you need it, and when you need it, you can’t get it.

You will not be able to get life insurance if you are already dying or have been diagnosed with a fatal disease.  You can’t get long-term care insurance if you have dementia.  It must be something you want to have to protect against the unknown.  You must be proactive when it comes to insurance and protections.  In your financial life, not having insurance, not protecting what God has brought into your life, is like building your house upon the sand (if you missed Part 10, click here).

Legal Documents

Another area of ensuring your family is protected is through obtaining proper legal documents.  It is important that you work with an attorney to make sure the laws of your state are followed.  The basics are a Will, Power of Attorney, and Healthcare Proxy.  Without a will, courts may decide who has custody of your children, or how your property is distributed.  Without a will, the process is typically slow moving and can be costly when attorneys and courts are involved.  Having a Power of Attorney means that someone you trust can sign on your behalf if you become unable to do so (while still living).  Your bills can continue to get paid and investment withdrawals can be processed with a Power of Attorney.  Similarly, a healthcare proxy is a person who can make medical decisions on your behalf if you’re unable to do so.

Beneficiary Designations

Another way of protecting your loved ones is by properly completing beneficiary designations.  Retirement accounts, life insurance, most investment accounts and even bank accounts, can all have beneficiaries named to them.  This ensures that your assets flow much more efficiently than by going through the will, which involves the probate process.  Always keep your beneficiary designations up to date based on changing life circumstances and consider reviewing these on all your assets every year or two.

If you have any questions on any of these protection options mentioned, feel free to email me at or call me at 716-707-1818.

Next Time: Saving

The views stated in this letter are not necessarily the opinion of Cetera Investors and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.