A rewarding and exciting part of investing is watching portfolio asset values grow over time to meet and achieve the financial goals that you set out to accomplish years ago. It is also satisfying to witness a retirement portfolio generate sufficient income to provide for a lifestyle in retirement like the one lived during peak earning years. And, really the joy of meeting those goals through “discipline,” is for many, the most satisfying reward of all.
On the other hand, there are less glorious and less rewarding facets of financial management and planning that struggle to earn most people’s attention. Areas such as disability insurance, long-term care insurance and health insurance. These are topics most do not prefer to think much about because it means that something unfortunate has to occur to obtain the benefit.
But, it makes sense that insurance is addressed and included as part of a comprehensive financial plan. For example, it is California state law that you must show financial responsibility for any vehicle that you own in order to be protected in case of injury to other people or damage to their property. Most people demonstrate that financial responsibility by buying an auto liability insurance policy from their insurance agent. Similarly, if you own your home and have a mortgage, the bank requires that you have a homeowner’s insurance policy. These examples illustrate how insurance not only plays a purposeful role against economic catastrophe like a car accident or a fire in your home, but how it is mandated to minimize the financial havoc it could wreak on you, your family and others.
The same is true for disability insurance or protection from the loss of income/wages from work. The council for Disability Awareness states that a “35-year-old female with an office job that likes to spend some time outdoors has a 24% chance of becoming disabled for three months or longer during her working career. And, a similar male has a 21% chance of becoming disabled before retirement.” What would happen in your household if loss of income were to occur? The aforementioned percentages have a higher degree of likelihood than your house burning down, and every lender mandates a policy in the event a fire were to strike.
Health insurance is no different, and as you may know, the costs of healthcare have only grown exponentially. To have a diagnosis that could lead to surgery without the help of insurance could ruin one economically. Most have health coverage from an employer or a personal policy, but for a retiree, it may be Medicare.
Building and amassing a portfolio is enjoyable, rewarding and it helps secure your economic future. But it is important to consider all aspects of not only building wealth, but also protecting that which you have worked hard to accumulate. We cannot predict what is in store for our future, but we can take steps to make sure that we are protected in the unexpected case of unknown medical expenditures, disability or long-term care. While the premium you paid can myopically be viewed as a waste of money, it could also turn out to be some of the best money you have ever spent, should you or your household ever end up needing it. In fact, that premium could be the very investment that preserves your investment portfolio for all the years ahead simply because you did not have to tap into it.
Jeff Runyan is the lead of Runyan Capital Advisors financial advisory team based in Beverly Hills, providing clients nationwide with wealth management and retirement planning advice. Backed by over two decades of industry experience, Jeff leads an investment team committed to designing investment portfolios that adhere to the premise, “Discipline Makes the Difference.” Learn more at RunyanCapital.com.
Securities offered through Wedbush Securities Inc. Member NYSE/FINRA/SIPC.