Insurance is an important element of any sound financial plan.  Different kinds of insurance help protect your and your family in different ways against the cost of illness, disability and death.

There are many forms of insurance and, unfortunately, no one-size-fits-all policy.  Life insurance is a virtual necessity if you have a spouse and children, but perhaps less important for a single person.  Disability insurance, which provides an income stream if you are unable to work, is important for everyone.

The following is a list of insurance many people require.

Life Insurance: 

Life insurance, payable when you die, can provide a surviving spouse, children and other dependents with the funds necessary to maintain their standards of living, can help repay debt, and can fund education costs.  The amount you need depends on your situation and should be coordinated with a financial plan.


A long term disability policy is activated, replacing a portion of your lost income, when you are unable to work for an extended period of time. Studies have shown you are much more likely to have a long term disability before age 65 (one in six chance) than you are to die.   Thus many seek to purchase an individual disability income insurance policy.  When purchasing coverage, look for non-cancelable policy and benefits to at least age 65.

Long Term Care: 

With an aging population and uncertainty about the future of Social Security, insurance to cover the high cost of nursing home or at home health care is becoming more widespread.  Medicare pays very little of the cost of long term care.  Medicaid will pay for the care, but only for patients whose assets are almost completely depleted.  In recent years insurance companies have improved long term care insurance significantly.  A financial plan can be greatly improved by implementing one of these newer long term care policies.

Points to Remember: 
  1. Your insurance needs will vary based on your family, age and economic situation.
  2. Life insurance is important for those who have families to cover living and other expenses in the event of death.
  3. Long term Disability is much more likely than death before age 65.
  4. Long term care insurance can be expensive and complex, but may be a necessity for older individuals who will not qualify for Medicaid.

Remember that, as we said earlier, insurance is not one-size-fit-all. Have a healthy dose of skepticism if someone tries to sell you insurance to solve all your financial planning needs. Just like every other element of your affairs, insurance doesn’t operate in isolation. It is inherently linked to your investment, estate, legal and tax situation. Talk to an insurance specialist to understand how insurance can fit into your financial picture.