Insurance is rarely a topic gleefully brought up at the dinner table or discussed when you’re out with friends. However, it is a crucial part of any holistic financial plan, and it looks different for everyone.
If you’ve made it this far—past the title and opening lines—you’re probably not as intimidated by the word ‘insurance’ as most, and you’re at least somewhat curious about the topic. You might be looking to review your current insurance, make changes, or add new coverage. The challenge is, there’s no one-size-fits-all solution—everyone has a different perspective when it comes to risk.
There are some general things to keep top of mind when changing your insurance portfolio though:
1) Insurance is sold, not bought. Due to the nature of the insurance industry, most insurance brokers are compensated based on their sales. While there is nothing inherently wrong with this, you should be aware of being sold insurance products that you don’t really need. Doing your own research can greatly reduce this overspending and help you feel more confident about your new plan. Don’t be afraid to ask questions either. Any reputable insurance broker should be happy to answer even the toughest questions, like how they are compensated!
2) Insurance is just a piece of your financial plan, not the whole plan. If your insurance premiums are infringing on your cashflows and breaking your budget, it may be time to adjust your plan and take another look at your financial goals.
3) There’s no perfect amount of insurance that fits everyone. We all have different circumstances and varying comfort levels when it comes to risk. The purpose of insurance is to shift some of that financial risk away from you, so you’re better prepared when life throws the unexpected your way. While $1,000,000 in life insurance might be ideal on paper, choosing a lower amount because it aligns better with your budget and risk tolerance is completely valid.
4) Term insurance is almost always better than permanent insurance. Change is one of the few constants in life and having an insurance plan that you can grow with and change when needed is a huge bonus. After all, you can always revert to permanent insurance in the future, usually without having to answer any medical or lifestyle questions.
5) If you’re insured through multiple plans, there may be some overlap. Many of us have benefits through a group insurance plan at work, while also being insured through other avenues. It’s important to fully understand what’s covered in your plans to identify any overlap or gaps.
6) Finally, don’t overlook disability and critical illness insurance. In our experience, many clients—especially younger ones—tend to be overinsured with life insurance and underinsured when it comes to critical illness and disability coverage. These types of insurance are often more expensive, but that’s because the likelihood of a claim is significantly higher.
There’s no one ‘correct’ way to build an insurance plan. What matters most is taking the time to understand the risks that could impact your financial goals. With a bit of research, a clear view of your options, and a solid understanding of your existing coverage, you can approach the process with clarity—and walk away confident that you’re prepared for life’s uncertainties.
