A critical part of financial planning that is often overlooked is insurance. Having various insurance policies will provide different benefits to your financial plan, ranging from protection to tax breaks. In fact, insurance is a component of most financial plans, and some financial professionals are licensed to sell it themselves. Read on to learn more about the role insurance plays in financial planning and what policies you might consider.
All insurance policies are designed to mitigate risks. They help offset the potential financial loss you may experience due to a foreseen event. From death to hospitalization to a house damaged in an earthquake, insurance will help to absorb some of the financial burdens.1
Insurance policies also provide tax benefits for the holder as well. Money paid toward life insurance premiums will be able to be deducted under Section 80C of the tax code. The premiums you pay for your health insurance may also be deducted from Section 80D of the tax law. Additionally, any death benefit from a life insurance policy will be tax-free, so your loved ones won't be saddled with an additional tax burden.2
Insurance Policies You Should Have in Your Portfolio
While there are insurance plans to cover everything from your jewelry to your long-term care, there are a few types of policies that you will want to have in your financial portfolio.
- Life Insurance: A term life insurance policy will provide a death benefit in the event of premature death. These policies are crucial to your financial planning as they will provide needed funds should the family's provider pass away and the family faces a significant financial loss.
- Home Insurance: One of your most significant assets is your home, and the sudden loss of it would likely cause significant financial hardship. Home insurance may help repair your home in the event of major and costly damage and replace it in the event of a total loss.
- Health Insurance: Medical bills are one of the leading causes of debt among those without coverage and may add up quickly enough to eat away at your savings. Having a health insurance plan that covers at least major medical expenses will reduce the risk of depleting your savings to take care of health concerns.
- Auto Insurance: Vehicle insurance is a must and, in most states, a requirement to legally drive a vehicle. This type of insurance may help you repair your car if it becomes damaged in an accident, but even more importantly, it may cover medical costs for other drivers and passengers if you were found to be at fault for the accident.1
Having proper insurance coverage is an essential part of life and your financial future. Not sure what coverage and how much you will need? Talk with a financial professional today to determine what policies will help complete your financial portfolio.
This material contains only general descriptions and is not a solicitation to sell any insurance product(s), nor is it intended as any financial or tax advice. For information about specific insurance needs or situations, contact your insurance agent. This article is intended to assist in educating you about insurance generally and not to provide personal service. They may not take into account your personal characteristics such as budget, assets, risk tolerance, family situation or activities which may affect the type of insurance that would be right for you. In addition, state insurance laws and insurance underwriting rules may affect available coverage and its costs. Guarantees are based on the claims paying ability of the issuing company. If you need more information or would like personal advice you should consult an insurance professional. You may also visit your state’s insurance department for more information.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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1 Insurance As The First Step In Financial Planning, Forbes, https://www.forbes.com/advisor/in/personal-finance/insurance-as-the-first-step-in-financial-planning/
2 Role Of Insurance In Financial Planning, Outlook Money, https://www.outlookmoney.com/insurance/role-of-insurance-in-financial-planning-5723