Life is full of unexpected surprises, some good and some terrible. No matter how hard you work to strengthen your financial position, a single accident, illness, or natural disaster can take it all away. While investing, saving, and budgeting are all important components of financial planning, insurance is equally critical in protecting your financial health.

Unfortunately, millions of people are uninsured or underinsured leaving themselves and their family open to significant financial risks. It’s important to understand why insurance should be a key part of your financial strategy and how to choose the right insurance coverage to protect your finances.

Why is Insurance Critical to Your Financial Strategy?

Most people are overly optimistic about their future. Few people realize how likely they are to experience a financial crisis that would require insurance protection. Here are some of the key benefits that make insurance a valuable part of any financial strategy.

• Protect Against Financial Loss – Unexpected losses due to accidents, theft, damage, natural disasters, and negligence can come with a steep price tag. Insurance can help eliminate or greatly reduce the financial loss from these events.
• Customizable – There are a wide range of insurance options available in today’s market including auto, home, health, life, disability, and umbrella policies. Insurance is often highly customizable allowing policy holders to select the type of insurance and amount of coverage that is appropriate for their financial situation.
• Access to Affordable Services – Some policies like health and home insurance allow policy holders to access affordable healthcare services and discounted home repair services without receiving a large bill.
• Peace of Mind – Nearly 57% of all Americans are unable to cover the cost of a $1,000 emergency expense. Insurance can help alleviate some of this stress and burden knowing that many major unexpected costs will be covered.
• Better Financial Planning – Predicting the future is a challenge. Your budget or financial plan can be easily derailed by a large expense. Insurance helps to eliminate or soften these financial blips to help you plan better and anticipate your monthly expenses.

Selecting the Right Types of Insurance

The market has a wide range of insurance products available. Knowing where to start can feel overwhelming. Below are some of the most common types of insurance that everyone should carry. However, it's important to get advice from a professional to find the right coverage to fit your unique situation.

1. Health Insurance

Health insurance is probably the most critical form of insurance to have. In fact, 60% of all bankruptcies are a result of crushing medical bills. Despite this, a report from the Commonwealth Fund found that 18% of the adult US population lacked sufficient health insurance.

2. Auto Insurance

Each year, US drivers are involved in over 6 million crashes that result in $340 billion in property and vehicle damage or injuries. Since accidents can happen at any moment, it’s best to not be one of the eight drivers who is currently uninsured in the United States.

3. Home Insurance

For most people, their home is likely their largest asset. It’s important that you have enough insurance to cover the value of your home in case it gets destroyed from flood, fire, or other disaster. Most insurance companies require policy holders to have enough coverage to cover 80% of the replacement value of their home. With the rising price of homes in recent years, many homeowners are left underinsured because they failed to update their policy.

If you don’t own a home, it’s a good idea to still have some protection in the form of renter’s insurance that can cover many of the same things as home insurance.

4. Life Insurance

Life insurance is a great way to protect your family after you are gone. There are two main types of life insurance – term and whole. Term life insurance tends to be cheaper. However, whole life insurance often allows the policy holder to withdraw money from the policy to help cover financial expenses. According to LIMRA, nearly half of all US households have no form of life insurance coverage.

5. Disability Insurance

Your financial strategy largely depends on your ability to generate income. But what if you become injured or sick? How will your family cover your living expenses? Disability insurance is a supplemental insurance that helps policy holders replace between 40% to 70% of their income if they can’t work because of a severe injury from an accident or illness like cancer.

Let a Trusted Advisor Help You Select the Right Insurance Protection

The more insurance options you purchase, the more protected you and your family will be. However, this can get very expensive quickly. At Market Insurance Advisors, our goal is to help our clients understand their insurance needs and identify potential risk factors that they hadn’t considered before. Contact our team today to find out how we can help