MANAGING FINANCIAL RISKS WITH INSURANCE
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FOREWORD Thank you for your time and interest. This booklet was created as an educational guide with the intent to bring you greater clarity and understanding of the financial decisions you make. If you need more information on a subject discussed, we welcome your email and will attempt to get you the answers you need. Please be mindful as you read this, everyone’s financial situation is different. So any product or solution must match your specific financial picture. We strongly recommend you consult with a highly-rated professional about every financial decision you make. Because, just as not all products are created equal, neither are all financial professionals, and the difference in knowledge and advice can be substantial from one advisor to another. Working with a highly knowledgeable, independent, well-rated professional can make all the difference when it comes to the results you achieve. If you are ready to explore your retirement options and want some help cutting through the clutter and jargon, visit www.CertifiedSafeMoney.com for unbiased information and to connect with professionals who can answer all of your most pressing questions. If you ever have feedback related to this booklet or concerns about your retirement income and financial security, please email us at [email protected]. We’re happy to help. CSM202101MANAGINGRISK 3 [email protected] www.CertifiedSafeMoney.com
Regardless of where you live and how careful you aim to be, risk will always be a part of life. This is the case both physically and financially. When accidents occur, they often require repair or replacement of items, medical attention, legal representation – or all of the above! And all of this can be pretty costly. That’s why managing financial risks with insurance is an essential part of the best retirement plans. TYPES OF INSURANCE COVERAGE Many types of insurance coverage are available in the marketplace today, and each of these can provide coverage for various situations. But all of these insurance policies can also come with a lot of “moving parts,” making it confusing to determine which plan(s) is right for you. Insurance policies can also come with a great deal of unfamiliar terminology and legalese. If you don’t read through the “fine print,” though, you could end up purchasing too much or too little coverage or possibly the wrong type of solution for your needs. The coverage that you ultimately purchase should ideally fit in with your specific needs and objectives. It should also coordinate with all of the other pieces of your complete financial plan. To protect your current and future financial situation, you should consider some or all of the following types of insurance coverage: - Homeowner’s insurance - Auto insurance - Life insurance - Health insurance - Liability insurance - Disability insurance - Personal property insurance - Long-term care insurance - Retirement income insurance (annuities) CSM202101MANAGINGRISK 4 [email protected] www.CertifiedSafeMoney.com
Homeowner’s Insurance Homeowner’s insurance is a type of insurance protection covering the cost of certain losses and damages to an individual’s residence, along with furnishings and other assets in the home. A home insurance policy could also provide liability coverage against accidents in the home or property. There are seventeen different “perils” or dangers that may be insured with a homeowner’s policy. A standard homeowner’s insurance policy will cover eleven of these, and you can typically add the remainder to the policy as riders or add-on coverage. The basic covered perils in a homeowner’s insurance policy include: - Fire or lightning - Smoke - Windstorm or hail - Vandalism or malicious mischief - Explosion - Theft - Riot or commotion - Breakage of glass or glazing - Damage caused by aircraft - Damage caused by vehicles - Volcanic eruption The additional homeowner’s coverage can include the following: - Falling objects - Weight of ice, snow, or sleet - Electrical surge damage - Water-related damage from home utilities or appliances (freezing, rupturing, and accidental overflow) Most insurance types – including homeowners – will also have various exclusions, meaning that certain items are not covered (although in some cases, you may purchase the additional protection for an added premium charge). Some typical homeowner’s insurance policy exclusions include the following: - Flood - Vacancy - Earthquake - Sewer backup - Nuclear or radiological accidents - Sinkholes - Environmental contamination - Mold remediation (unless it is the result of a covered event) - Normal deterioration/neglected maintenance - Intentional damage by the policyholder or a family member - Liability or losses that are related to business activities - Damage that is caused by pets or other animals Those who rent should have a renter’s insurance policy that provides coverage for belongings, as well as various liabilities. This coverage could also cover the cost of alternate living expenses in case of a significant loss. For instance, as a renter, the home or apartment owner would have coverage to repair or rebuild the structure. But, if you lost items like furniture, electronics, and clothing, it could be quite costly to repurchase. This is where a renter’s insurance policy can be beneficial. CSM202101MANAGINGRISK 5 [email protected] www.CertifiedSafeMoney.com
Auto Insurance Auto insurance protects you against financial losses incurred through damage to your vehicle or theft. There are several areas where auto insurance can provide coverage, including: - Property – Coverage for vehicle damage and theft - Liability – Legal expenses related to property damage or bodily injury to another individual - Medical – The cost for the treatment of injuries and rehabilitation, as well as lost wages and funeral expenses In most U.S. states, at least a minimum amount of auto insurance is required. This minimum coverage will not typically cover costs associated with your vehicle. So, to protect yours, you should consider the following options: - Collision – Collision coverage will reimburse you for damages to your vehicle that occur as a result of a collision with another vehicle or object – such as a tree or a fence – when you are at fault. (This coverage will not, however, pay for items such as normal wear and tear that occurs or mechanical failure of your vehicle.) - Comprehensive – Comprehensive coverage insures against theft and damage caused by an incident other than a collision, such as hail, fire, flood, and vandalism. CSM202101MANAGINGRISK 6 [email protected] www.CertifiedSafeMoney.com
You can access money from the cash value portion of a permanent life insurance policy for any reason – including supplementing retirement income, paying off high-interest debt, or making highticket purchases such as a new vehicle, or paying for a nice vacation. While many people believe that life insurance is only necessary when an individual has young children counting on their income, this is not necessarily the case. Life insurance can be used in a wide variety of financial strategies at any age, such as the payment of estate taxes, funeral, and other final expenses, charitable giving, and efficiently transferring assets to survivors. Life Insurance Life insurance is a type of coverage that pays out a death benefit to a named beneficiary (or to multiple beneficiaries) upon the insured’s death, provided that the policy is still in force when he or she dies. The death benefit proceeds from life insurance are typically income-tax-free to the recipient(s). The two primary life insurance categories are term and permanent. Term life insurance offers death-benefit-only coverage without any associated cash value or investment buildup. These policies remain in force for a certain amount of time, or “term,” such as ten, twenty, or even thirty years. Many insurance carriers offer a one-year renewable term life insurance option, too. The term is considered to be the most basic, plain vanilla type of life insurance protection. The premium for term life insurance is often quite low, especially if the insured is young and in good health when the policy is purchased. Permanent life insurance offers both death benefit protection and a cash value component – and this coverage will remain in force – regardless of the insured’s increasing age or any adverse health issues that may be contracted (as long as the premium is paid). Cash value life insurance in a permanent life insurance policy that can grow on a taxdeferred basis, meaning that you won’t have to pay taxes on the gain in the account unless or until the funds have been withdrawn. CSM202101MANAGINGRISK 7 [email protected] www.CertifiedSafeMoney.com
Health Insurance Healthcare costs continue to rise every year. Even a basic check-up from your doctor can be costly, not to mention the time spent in the hospital or emergency room. Prescription medications can add even more to your overall medical expenses. That’s why it is essential to have health insurance coverage. Even if your policy requires out-of-pocket copayments or deductibles, it can save you thousands of dollars – or more – depending on your healthcare needs. Many people 65 and older rely on Medicare for some or all of their health insurance needs. Medicare covers various hospitalization charges through Part A, and it covers doctors’ services and medical supplies and equipment through Part B. Medicare Part D can also be purchased. This covers prescription medication costs. Medicare can require various out-of-pocket charges like copayments, deductibles, or coinsurance. So, to help reduce these expenses, many people will purchase a Medicare Supplement (Medigap) plan. As an alternative to purchasing Medicare Parts A, B, and D, qualified individuals may instead obtain a Medicare Advantage plan. These policies provide the same benefits that are offered through Medicare Part A and Part B. Many Medicare Advantage plans will also offer prescription drug coverage and other “extras,” such as vision and dental coverage. CSM202101MANAGINGRISK 8 [email protected] www.CertifiedSafeMoney.com
Liability Insurance Suppose you are legally liable for any accident or injury that occurs. In that case, you could be responsible for medical costs that the injured party incurs, as well as the expense of legal claims. That’s why liability insurance coverage is a part of a good retirement plan. Liability insurance policies are taken out by anyone who owns a business, drives a vehicle, practices medicine, or practices law – so, basically, anyone who could be sued for damages or injuries to someone else (including their clients or patients). There are different types of liability insurance, including: - Employer’s liability and workers’ compensation can protect companies against liability that arises due to an employee’s injury or death. - Product liability insurance is geared towards companies that manufacture products. This coverage protects them against the cost of a lawsuit brought about due to injury or death caused by their product(s). - Indemnity insurance covers companies against negligence claims that are due to financial harm as a result of mistakes or failure to perform. - Director and officer liability coverage is insurance that can protect a company’s board of directors or officers against liability if the business is sued. - Umbrella liability protects against catastrophic losses and will pay out when the limits on other insurance coverage have been reached. - Commercial liability insurance offers coverage for lawsuits that arise from injury to employees and the public. It may also cover property damage that an employee causes. Commercial liability insurance may cover other areas, such as tenant liability, infringement on intellectual property, slander, libel, or contractual liability. - Comprehensive general liability policies can be custom designed for a business. These policies can cover various issues, such as medical payments, property liability, bodily injury, and even compensatory and general damages for lawsuits. CSM202101MANAGINGRISK 9 [email protected] www.CertifiedSafeMoney.com
Disability Insurance The ability to earn an income could be the biggest asset that most people have. Without it, you would not likely have the money to purchase or rent a home, pay for food, or obtain necessary medical care. That’s why retirement planning is so important. Someone who is just age 35 has a 50% chance of becoming disabled for ninety days or longer before reaching age 65. And approximately one in seven people between ages 35 and 65 can expect to become disabled for five years or longer. How long could you pay your bills if you become disabled? How long would it take to deplete your savings – and if this happened, what would your backup plan be for future retirement income? Disability insurance can pay you a regular income benefit for a set period of time, such as five or ten years, or even until you reach age 65. This coverage can also help you keep your other assets in their initially intended place while allowing you to continue paying your living expenses. Personal Property Insurance Personal property insurance provides coverage for the items inside your home, such as appliances, furniture, and other personal possessions, if they are stolen or destroyed. This is the case whether or not the item(s) was inside or outside of your home. Often, personal property is insured for between 20% and 50% of your home’s coverage limits. For example, if a homeowner’s policy covers the home structure at $250,000, then the personal property may be covered at $100,000 (40% of $250,000). Before purchasing personal property insurance coverage, though, it is recommended that you take inventory of your possessions and determine how much they are worth. You can then decide whether you want to cover your personal property for its replacement cost value (the exact amount to replace the same objects for the current market price) or for actual cash value (the cost of the item up to its value, minus however much it has depreciated since it was originally purchased). Long-Term Care Insurance Many people don’t realize that someone age 65 today has almost a 70% chance of requiring at least some long-term care in their remaining years. This care can be expensive. For instance, (in 2019), the average monthly cost (in the U.S.) for a private room in a skilled nursing facility was more than $8,500. And, while home care services were less, they could still run, on average, close to $50,000 per year. How would significant long-term care expenses impact your retirement savings? Unfortunately, Medicare pays very little for long-term care services. That’s why a standalone long-term care insurance policy is one way to ensure that you don’t deplete assets in case of a long-term care need. Other options may include a combination of a life insurance/long-term care plan or an annuity/long-term care option. CSM202101MANAGINGRISK 10 [email protected] www.CertifiedSafeMoney.com
Retirement Income Insurance (Annuities) Throughout their lifetime, many people will insure their homes, their cars, and their health. But what about insuring your retirement income? That’s precisely what an annuity can do. A significant concern in retirees’ minds today is running out of income while they still need it. But an annuity can ensure that you receive income for a set period, or even for the remainder of your life, regardless of how long that may be. Annuities represent a contract between you and an insurance company that promises – in return for either a lump sum of money or multiple contributions – that will make regular disbursements that begin right away or at some time in the future. Due mainly to the disappearance of employer-sponsored pension plans, more people are turning to annuities to have a reliable income to count on in retirement, regardless of what happens in the stock market. ARE YOU COVERED FOR LIFE’S UNCERTAINTIES? Ensuring that your assets and financial security are protected is an essential component of any safe financial plan. Because risk is a part of our everyday lives, you must be adequately covered in all areas. While most people don’t relish the idea of paying insurance premiums, your coverage can be well worth it if or when you have to file a claim. Speaking with an insurance specialist can help you determine the right amount of protection and prevent you from being either under-or over-insured. If you would like to set up a time to chat with an annuity planning professional who can review your needs and then match you up with the right amount of coverage from toprated insurers, feel free to contact us [email protected] or search for the best-rated safe money advisors by visiting www.certifiedsafemoney.com. CSM202101MANAGINGRISK 11 [email protected] www.CertifiedSafeMoney.com
CSM202101MANAGINGRISK 12 [email protected] www.CertifiedSafeMoney.com All investments, retirement, and estate planning strategies (collectively “Strategies”) have inherent risks. Content is not personalized financial advice and should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author on the date of publication and may change in response to market conditions. Although the information has been gathered from sources believed to be reliable, we do not guarantee its accuracy or completeness. There can be no assurance that you will achieve your goals if you implement any of the Strategies discussed. Past performance does not guarantee future results. Indexed universal life insurance may not be suitable for you, depending upon your investment objectives, risk tolerance, financial situation, and liquidity needs. Accessing policy cash value through loans and surrenders may lead to a permanent reduction of the policy’s cash value and death benefit, which may lead to a potential lapse of the policy. Insurance product guarantees are subject to the claims-paying ability of the issuing company. There may be tax penalties for distributions prior to age 59½. Working with a highly-rated professional does not ensure that you will experience a higher level of performance. Professional awards do not guarantee future investment success. Please contact the professional for more information regarding the criteria for any awards or rankings noted. Ratings can be based on client evaluations and the professional’s activity. Hyperlinks in this Booklet are provided as a convenience. Neither the information in this Booklet nor any option expressed herein constitutes an offer to sell or solicit any person to purchase any security or product. Investment decisions should not be made based on information in this Booklet. Individuals should rely exclusively on the offering material provided to them by a licensed professional or regulated entity when considering whether to invest. Usage of this Booklet requires your acknowledgment that you shall hold CertifedSafeMoney. com, Financial Media & Marketing, LLC, and its Officers, Directors, Employees, or Agents (collectively “FMM”) harmless. In addition, you specifically acknowledge and agree that no oral or written information or advice provided by FMM (Including without limitation its call center representatives) will (I) constitute legal or financial advice or (II) create a warranty of any kind concerning this Booklet or the services found on any website(s) related to or owned by FMM, and users should not rely on any such information or advice. FMM disclaims all representations and warranties of any kind, express, implied, statutory, or otherwise, to you and/or any other party, including, without limitation, any warranties of accuracy, timeliness, completeness, efficacy, merchantability, fitness for any particular purpose, and usefulness of the content provided. FMM shall have no tort, contract, or any other liability to you or any other users of content from this Booklet and/or to any other party. FMM shall not be liable to you and/or any other party for any lost profits or lost opportunities or any indirect, special, consequential, incidental, or punitive damages whatsoever arising out of or relating to the use of this Booklet, even if FMM has been advised of the possibility of such damages. Tax and legal information provided is general in nature and should not be construed as legal or tax advice, and it is not a substitute for your independent research and evaluation of any issue. If specific legal or other expert advice is required or desired, the services of an appropriate, competent professional should be sought. The firm is not engaged in the practice of law or accounting. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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