Insurance Fundamentals
Flash Video – Watch this short video for insights regarding insurance and
where it fits into your overall financial gameplan.
Chances are, you own several different types of insurance. The reason
you own insurance is to transfer financial risk from yourself to an entity
that is better prepared to deal with potentially huge financial liabilities,
namely an insurance company. If your home burned to the ground, would you
have enough money in your savings and investment accounts to rebuild it?
Unlikely. That’s why you purchase homeowners insurance. Similarly, if you died tomorrow, would your family be able to maintain their same standard of living without you? Perhaps, if you have adequate life insurance coverage. That’s what insurance does. It serves as a safety net for your finances.
You set financial goals for yourself. You want a comfortable lifestyle. You’d like to live in a nice house in a good neighborhood. You want your kids to get an excellent education. Insurance helps make sure that your financial goals for your family can be achieved, even if life throws some major curveballs your way – like sustaining a major injury in a car accident, being diagnosed with a chronic health condition or dying at a young age.
To understand where insurance fits into your overall financial gameplan, take a look at this pyramid graphic. Think of the bottom as the foundation of your financial plan. You want to make sure that no matter what twists and turns life sends your way, you'll have the financial wherewithal to protect you and your family. This bottom part of the pyramid is comprised of assets like insurance and emergency savings.
The top part of your pyramid is the asset accumulation component of your plan. Your investment decisions will hopefully fund all of the dreams and ambitions you have for you and your family. This part of the pyramid consists of appreciating assets like stocks, bonds, mutual funds, and college and retirement savings plans.
The “Asset Accumulation” part of your plan is extremely important and there are lots of great websites where you can learn more about how to save and invest wisely. However, the main focus of this program is the “Protection & Security” part of your plan. Saving for the future is vitally important, but only after basic protection needs have been met through a well-conceived insurance program.
You set financial goals for yourself. You want a comfortable lifestyle. You’d like to live in a nice house in a good neighborhood. You want your kids to get an excellent education. Insurance helps make sure that your financial goals for your family can be achieved, even if life throws some major curveballs your way – like sustaining a major injury in a car accident, being diagnosed with a chronic health condition or dying at a young age.
To understand where insurance fits into your overall financial gameplan, take a look at this pyramid graphic. Think of the bottom as the foundation of your financial plan. You want to make sure that no matter what twists and turns life sends your way, you'll have the financial wherewithal to protect you and your family. This bottom part of the pyramid is comprised of assets like insurance and emergency savings.
The top part of your pyramid is the asset accumulation component of your plan. Your investment decisions will hopefully fund all of the dreams and ambitions you have for you and your family. This part of the pyramid consists of appreciating assets like stocks, bonds, mutual funds, and college and retirement savings plans. The “Asset Accumulation” part of your plan is extremely important and there are lots of great websites where you can learn more about how to save and invest wisely. However, the main focus of this program is the “Protection & Security” part of your plan. Saving for the future is vitally important, but only after basic protection needs have been met through a well-conceived insurance program.