Insurance—Transferring Risk

As we develop your financial plan, part of our focus will include risk management. You are well aware that we all face countless risks every day. There is the risk of an automobile accident, the risk of becoming disabled, the risk of getting sick, and the risk of dying, to name just a few. Whether or not you actively consider the chances that you take, there is a certain level of risk that you are willing to live with in the short and long term. In cases where you are not comfortable managing the risk, we recommend insurance products.

What Insurance Does for You Is Simple: It Transfers Risk

In exchange for a regular premium, insurance companies will take on the risks that you will require long-term care—that you will die, that you will become disabled, and so on. This understanding of insurance should make the decision of whether or not to invest in it somewhat clearer. If you choose not to buy a particular insurance policy, you are taking on a certain degree of risk. Let's use flood insurance as an example. Whether you live in a flood zone or a desert, if you do not buy flood insurance, you are basically saying, “If my property floods, I am shouldering the risk of repairing any damage.”

If you invest in insurance, however, you successfully reduce your risk level by transferring your risk to an insurance company. Continuing with the example of flood insurance, if you own a flood insurance policy, you are saying, “If my property floods, I am prepared and my savings will not be destroyed by a flood. The insurance company is taking on the risk of flood-related damage.”

Our goal is to make sure that you are comfortable with the amount of risk that you are taking—emotionally and financially—and to advise you on risk management products. You may believe that you are comfortable taking on the risk of providing for your possible long-term care expenses, but you might be unfamiliar with how costly that care may be. Our process requires that we present you with the facts, the strategies, and your situation, and together we will develop a plan.

Insurance is not for everyone, but it may be right for you. If you're interested, we will explore the possibilities and make sure that you are taking on an appropriate level of risk.