Your career, your personal finances, and your family are always changing. So it’s important to make sure you have the right insurance coverage to protect yourself today—not the you from a few years ago.
As major life events occur, assess your insurance coverage, says Rob Miles, managing director at Truist Wealth, and periodically review this critical part of an overall financial plan. Miles shared a recent example of a successful financial services executive who was “traveling around the world with no will and no life insurance for his spouse and three young children.” Although the executive had developed a solid investment program, he had overlooked this part of the plan and created a major risk.
Beyond builder’s grade
Your home and auto policies should be tailored to the unique details of your home, auto, and life.
Auto policy limits vary by state, so you’ll need to work with an insurance agent to determine the appropriate coverage based on:
- Your ability to pay for damages caused to others in an accident, should you be at fault—or if another motorist lacks coverage. Hospital bills, vehicle damage, and lost wages can add up quickly.
- The amount of risk you’re willing to accept.
- Whether you prefer the peace of mind that comes with a lower deductible versus a higher deductible with a lower premium.
Similar factors come into play with homeowners coverage. Plus, you’ll want to ensure your home’s unique features are adequately covered. Specialty high-value home insurance also typically provides higher liability coverage, the ability to add flood insurance and coverage for vacation homes, and increased coverage for personal items such as jewelry, fine art, and collectibles.
Another important consideration is personal liability. Depending on your career and community visibility, you could be seen as a desirable “deep pocket” in a lawsuit and exposed to damages above the maximums in your policies. “When you have wealth, you might become a target,” says Jacqueline Parks, a Truist wealth strategist.
Umbrella policies and extra personal liability coverage
To give you additional coverage beyond your home and auto policy limits, Parks suggests considering an umbrella insurance policy.
Umbrella policies kick in after your other policies’ maximums are exhausted and can provide additional coverage into the millions—often for a relatively low annual premium. But how much you need depends on your assets’ total value, the risks involved, and other factors.
Umbrella policies also can provide more than supplemental coverage for your current policies. For example, some umbrella insurance also offers personal liability coverage for other types of lawsuits, such as accusations of libel and slander.
Your policies can also offer additional coverage for unique risks such as kidnapping or ransom. This might sound extraordinary, but if you regularly travel internationally or have a very public career (as an athlete or politician, for example), you should prepare for these potential threats. Likewise, athletes and entertainers should also evaluate insurance needs related to the risks involved with performing.
For example, Truist’s Sports & Entertainment Group recommends that college athletes who might have the chance to play professionally acquire a personal total disability (PTD) policy. This policy protects athletes against a career-ending injury.
Policies can replace any current or projected future income, or they can help athletes make a comfortable transition to the next phase of their lives.
Everyone’s situation is different, but the Sports & Entertainment Group says a policy that replaces current and projected future income might cost too much. Instead, they advise that athletes focus on an amount of insurance that helps them make a transition as part an overall financial plan.
Life insurance for estate planning
Different types of life insurance provide varying levels of coverage and benefits. For example, depending on your goals, you might want a term or permanent life insurance policy. Or perhaps a whole or universal life policy—which have cash value that earns interest and might be helpful if you’re currently saving the maximum allowed in tax-deferred accounts.
You should also review your policies regularly. Questions to ask include:
- Are your policies performing as expected?
- Are your beneficiaries correct and the coverage amounts enough?
- When was the last time your policies were reviewed objectively? If more than three years, it’s time for a review.
“Life insurance can do more than just provide income replacement for your beneficiaries—it’s also an effective financial planning tool to help them pay estate taxes and provide liquidity when it may be needed most,” says Nathan Duncan, senior vice president and planning strategist at Truist Wealth. “To take advantage of this benefit, it’s typically best to have the policy in an irrevocable life insurance trust. That way, the trust technically owns the policy and the death benefit won’t be subject to estate taxes.”
As you continue to build wealth, you’ll have more to protect. Set regular reviews with your financial and insurance teams to ensure you have the coverage you need.