Hope for the Best, Plan for the Worst – May 2016
Excerpt From The Financial Shepherd
Why Dollars + Change = Sense by Glen Wright and Sy Pugh
Hope for the Best, Plan for the Worst focuses on the sometimes random, yet inevitable events in life that occur (illness, disease, disability, death) but are never fun to discuss. It is of the utmost importance that we prepare ourselves and others (those that we leave behind) for the perils and hardships of life that often create financial difficulty if not addressed. Unfortunately, many of us find ourselves in a reactive mode instead of a proactive mode; responding to the latest crisis instead of simply implementing the plans that we have already put in place in advance. What’s worse, when times are tough, we tend not to follow our faith, but rather our sight and circumstances.
One of the most readily available and reliable types of financial planning comes in the form of Life Insurance. Historically utilized by the wealthy to ensure a comfortable standard of living for loved ones, the purchase of life insurance provides a sense of security and stability often included in wills and estate planning. Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual’s or individuals’ death or other event, such as critical illness or terminal illness. In return, the policy owner agrees to pay a stipulated amount at regular intervals or in lump sums to maintain an active, executable policy.
As difficult as it is to talk about, think about, or plan for death, it is one of the necessities of a responsible life. But sometimes it isn’t death that brings us to a halt, it’s an unexpected accident or illness that literally knocks us off our feet. Many people believe that their biggest asset is their home. For most of us, our biggest asset is the ability to work and earn an income. Not being able to work—due to job loss or a disability having taken away the ability to work—is often financially devastating. Everyone who works for a living is very familiar with what can happen if they are fired. On the other hand, the possibility of becoming seriously disabled is a risk few seem to think much about. How likely is it that you will become disabled? According to one study, 30 percent of all Americans between the ages of 35 and 65 suffered a disability lasting at least 90 days. The risk of disability is real. The question is, ‘What to do about it?’
For business owners in particular, If you become disabled, your business will fail unless you have proper planning in place like disability insurance to cover the monthly expenses and/or to pay for someone with your expertise to cover your job duties while you are out. Doctors hear this all the time in medical school, but most business owners do not think twice about properly insuring themselves. Also, you have to think about the impact on the business if something happened to the key employees who are vital to the growth of the company. In the insurance business, these individuals are called “key persons.” You may also want to consider additional life insurance for them to protect your company and their families in the event of an accidental injury that requires covering their responsibilities or replacing them. Women business owners definitely need to factor this in because statistically, women are more likely to have a disabling event occur than men.
Sometimes bad things happen and no one is exempt. Make sure in your financial planning process that you begin with the end in mind; hope for the best, but plan for the worst.
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