Protecting Your Future: Insurance Coverage to Consider
Reading time: 8 minutes
February 9th, 2024
On the journey towards achieving major life goals, such as buying a home, sending your children to college, or planning for a comfortable retirement, a financial plan serves as a roadmap that can set you on the path to get where you want to be.
These types of plans (which are often best created with the help of an experienced financial advisor) outline your current financial situation. They usually include a breakdown of your assets, income, saving, spending, and debt in order to create a budget that prepares you to meet your financial obligations and objectives, now and in the future. But you know what they say about best laid plans.
A comprehensive financial plan should also prepare you for unexpected life events. Oftentimes, there is no bigger setback to your financial future than not preparing for unexpected emergencies. A plan that includes the evaluation and mitigation of risks and vulnerabilities will enable you to weather a storm instead of being knocked off course. That's where insurance comes in. No financial plan is complete without considering insurance options to protect your assets, your family, and yourself.
Just as your financial plan is specifically designed for your life and unique situation, your insurance policies should also be individually tailored to best suit your needs. In this article, we'll cover a few different types of personal and business insurance options to be aware of, and how these can help you manage risk and offer peace of mind.
For individuals, life insurance provides financial support to your beneficiaries in the event of your death. Even if you're leaving your loved ones a sizeable nest egg, life insurance can help bridge the gap when estates are being settled, or further ensure your loved ones will be comfortable after you're gone.
The funds from life insurance policies can be used for anything, which make them helpful during what's already a difficult time. Many people obtain life insurance to cover outstanding debts they may leave behind such as mortgages or credit cards, while others may want to leave a legacy behind in the form of funding children’s college tuition or helping create a financial nest egg for loved ones.
There are two categories or life insurance, term life insurance and whole life insurance.
- Term life insurance provides coverage for a set period of time, such as 10, 20, or 30 years, and pays out if an individual dies during the term. Death benefits and insurance premiums are guaranteed to remain the same throughout the entire term. However, if you outlive the term and your insurance coverage ends, your beneficiaries will not receive any money.
- Whole life insurance provides coverage throughout a person’s entire life. Premiums for whole life insurance tend to cost more than term life insurance, but it comes with the comfort of knowing that your plan will never expire. Some whole life insurance plans also offer a cash value component, which can grow over time and can be borrowed against (not unlike how a home equity line of credit works) or surrendered for cash.
Life insurance is often a factor in estate planning, to help your loved ones cover final expenses, estate taxes, and ensure an inheritance for your beneficiaries. Life insurance can also be used to help supplement retirement income by borrowing from your policy’s cash value or paying for long-term care services by converting your plan into a hybrid long-term care policy.
Long-term care insurance
As the name suggests, long-term care insurance is designed to provide coverage for individuals who may require assistance with daily living activities or medical care over an extended period of time. Unlike the benefits from life insurance which can be used for anything, long-term care insurance benefits are specifically designed to help cover costs associated with long-term care services like an in-home health aide, nursing homes, or hospice, which are not typically covered by health insurance or Medicare.
Consulting with a financial advisor can be helpful in navigating the options and making an informed decision about long-term care insurance.
Unlike long-term care insurance, which specifically covers the costs of long-term care services, disability insurance is designed to protect against financial hardships that may arise from the loss of income in the event you become unable to work due to an illness or injury.
Typically, disability insurance pays a percentage your pre-disability income, helping to cover essential expenses such as mortgage or rent payments, utilities, medical bills, or even food. The percentage of your income it will cover will vary with the plan you select. If you choose to add disability insurance to your financial plan, it's important to revisit your coverage regularly, but particularly when you hit any sort of career milestone, such as a promotion, to ensure the policy has adequate benefits should the need arise.
There are many different types of insurance plans out there to consider so it can be helpful to build your financial plan with an expert. A Bankoh Investment Services advisor can help you understand your options and which insurance policies may be best for you and your needs.
This material is provided for educational purposes only and is not intended to be relied upon as research or an offer or solicitation to buy or sell any insurance or investment products. Bank of Hawaii and its affiliates do not provide tax, legal or accounting advice. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by Bank of Hawaii or its affiliates to buy or sell any securities, investments, or insurance products.
Investment and Insurance products are offered and sold by Bankoh Investment Services, Inc., a nonbank subsidiary of Bank of Hawaii and a member of FINRA/SIPC. Investment and Insurance products are NOT FDIC INSURED, NOT BANK GUARANTEED, NOT A DEPOSIT, AND MAY LOSE VALUE, INCLUDING LOSS OF PRINCIPAL.
You're about to exit BOH.com
Links to other sites are provided as a service to you by Bank of Hawaii. These other sites are neither owned nor maintained by Bank of Hawaii. Bank of Hawaii shall not be responsible for the content and/or accuracy of any information contained in these other sites or for the personal or credit card information you provide to these sites.