Welcome back to our series of blogs on Blind Spots! We all have Blind Spots, things that are potentially hazardous that we don’t even see, things that we should know, or have awareness of, but don’t. This series of blogs focuses on common financial Blind Spots that we see when working with our clients. Today, we want to talk about your insurance policies.
Likely, you have (or have had), automobile insurance, homeowner’s insurance, umbrella liability insurance, health insurance, Medicare, life insurance, long term care insurance, or disability insurance. You may even have some less common types such as cancer insurance, accidental death and dismemberment insurance, business liability insurance, annuities, boat insurance, aviation insurance, etc.
Insurance is best used to transfer potentially catastrophic financial risk from your family to an insurance company. One example of catastrophic financial risk is a neighbor’s child accidentally breaking their neck when falling off a trampoline in your yard. Another example would be a health condition that requires a long and expensive treatment plan.
Insurance provides a critical benefit to most families: the peace of mind that they will not be financially wiped out if they suffer from a covered risk. Most families spend a lot of money over their lives on various types of insurance. Isn’t it interesting then, that we find that most people really don’t understand the specific details of their policies? That they really don’t understand what they are paying for and under what circumstances a policy will pay benefits?
We see it all the time. And, those are the Blind Spots.
I say this not to be critical but to raise awareness that our lives are busy, and all too often, the simple details of complex financial products aren’t fully understood. Often, people are concerned with simply having some insurance as opposed to having the most appropriate type of insurance. Many are more concerned with the price of their insurance as opposed to the provisions in their policies.
And, we often do get away with it. If we don’t have a catastrophic event, such as our house burning down, a fatal automobile accident that is our fault, an expensive course of medical treatment, a long disability, a death of a spouse, etc., we may never truly understand what our policies will pay for and what they won’t. In fact, many of us may indeed get away with it because we may never make a large insurance claim. It’s a roll of the dice…
You don’t want to pin the success of your financial plan on a roll of the dice. You do want to create goals, assess risks, and create strategies to make progress toward your goals while mitigating the financial impact of risks. Once you recognize the risks to your plan, you want to understand the probability of their occurrence and the potential financial impact. Then, decide if insurance plays a role. If it does, choose a policy that has the provisions that best address the risks to your plan. Sure, this will take a little more work. You will need to read the policy and ask questions if you don’t understand the legal language. But it is best to put the work in up front as opposed to finding out later on that your policy doesn’t cover what you thought it did!
Remember, “you don’t know what you don’t know.” Without being aware of your financial Blind Spots, it is almost impossible to make sound financial decisions. At Second Half Strategies, we try to identify and help you uncover your various financial Blind Spots. Our Integrated Wealth Management process includes Planning, Guidance and Advice. By following our process, you should have the confidence to know that you are taking proactive steps to uncover and potentially reduce your Insurance Policy Blind Spots!
What process are you using to find and address your Blind Spots?