Financial lives are full of risks. Left unchecked, they can devastate wealth and financial security. With proper management, many risks can be controlled or even eliminated.
Such risks include:
- Risk of breadwinner death. Ongoing income is critical to funding lifestyle, healthcare, education, and other needs, as well as building up savings and investment reserves for emergencies and future needs like retirement. Life insurance is usually the best way to manage this. Camarda Wealth believes that inexpensive term insurance is often the most cost-effective solution.
- Risk of lawsuits and other liabilities. Car accidents, injuries on your property, your personal and professional actions, and for a period, the actions of your children, all are dangers to your wealth. In the worst cases, your assets could be lost to judgements in lawsuits. Camarda Wealth believes these risks should be managed with a dual strategy:
- Liability insurance such as homeowners, auto, malpractice, and so on. Most folks should also consider umbrella coverage on top of these to boost liability limits.
- Asset protection planning which includes using the right kind of titling, and structures like LLCs and some trusts. This strategy is intended to keep predators away from assets if insurance is not enough, or if the insurance company finds a way to deny the claim.
- Risks to your property such as from fires and hurricanes. This is usually best managed with insurance. Make sure the policy actually covers all the risks, and get a plain-English document that explains it. People are often surprised to find claims denied because the insurance company says there was never any insurance for the reason for the claim to begin with!
- Risks to health which include both sickness and the loss of income due to the inability to work (disability). These are most often covered with insurance.
Still, getting good advice on risk management can be difficult. Get Camarda Wealth’s free total wealth health checkup.
Here are some pitfalls to watch out for:
- Expensive insurance products. This can be particularly a problem with life insurance and annuities, which can be complex, confusing, expensive, and pay very high commissions. Such commissions can make it hard for the selling agent to give objective advice. In nearly all cases, Camarda Wealth believes cash value insurance like whole life and survivorship/last to die to be poor choices.
- Keeping insurance beyond the need for it. Often people keep paying on old policies – usually life insurance – after the need for insurance has passed. We believe it is best to do an insurance cost/needs analysis on a regular basis. What are you paying, what do you need, and what is the best plan for your life now?
- Using incomplete asset protection planning. Getting competent advice is critical. For instance, setting up an LLC that lacks the right “operating agreement” provisions can create the illusion that assets are protected when, in fact, they are not.
- Buying unneeded or overpriced insurance. You should do a cost/benefits analysis. Often, the premium cost is not worth the potential benefit if a loss occurs, especially for smaller exposures you can afford to self-insure for.
At Camarda Wealth we do not just help individuals and families. We help businesses, too. Learn about our business owner planning.