Around 4,500 years ago, the massive and intriguing structures known as The Pyramids of Giza were built. These pyramids still stand today due to the strength of their geometrical shape. However, if there was a crack in the base of one of these pyramids, what do you suppose would happen? It most certainly would jeopardize the stability of the entire structure.
Let’s take a moment to examine the Life Planning Pyramid and more specifically, the base of this pyramid. The Life Planning Pyramid is the structure of your life’s financial plan. The base, or foundation, of this pyramid consists of the measures you take to protect everything you build in life: your emergency savings, your legal documents, and your risk management plan. Today we want to focus on the risk management piece which includes your insurances.
This is one of the very first things we address when we begin working with a family for one simple reason. Simply put, insurance protects you, your family, your business and your wealth. Without insurance or the appropriate amount of insurance, you are susceptible to a severe crack in your foundation that can shoot straight to the top, putting the entire pyramid at risk.
Consider the following questions:
- How much can you afford to pay in the event you get sued for someone tripping over a water hose at your home and breaking his/her arm?
- Is it important to protect your assets and reduce the stress for your family in the event you need long-term care or become disabled?
- How much income would you like to provide your family in the event of your death?
- Have you thought about your spouse losing Social Security income after you are gone?
- Is the wealth you spent years accumulating valuable - or would you like the IRS to tax up to 40% of this wealth at the time of your death?
And just because you believe you are adequately covered doesn’t mean that you are. Insurance is like a piece of Swiss cheese. No matter if it is home, auto, business, life, health, long term care or some other insurance; it has holes. And usually we know that it is more a matter of identifying how many holes there are and how big they are. Why? The most common practice of purchasing insurance is working with your agent(s) on a “don’t ask; don’t tell basis.” The agent doesn’t always ask everything that needs to be asked, and you only tell them what you feel is relevant. But who is looking at everything, your entire Life Plan, and making the recommendations? And as a business owner, this overview is even more critical because you have more exposure to risk.
100% of the families we have worked with over the past 28 years have needed to tweak their insurance in some way. It might be something as little as a change for cost effectiveness on their auto insurance, to increasing their liability coverage, to updating based on a life change, to a complete overhaul.
So, how do we do it? We get to know you…in great detail. We learn about your present situation, future and goals, your feelings about the latter and risk, and last, but not least your family dynamics. Then we look at your current plan holistically. We identify what is working, what is not working and what is missing. Then we help you adjust or create an overall plan that is uniquely suited to you.
Finally, I would like to remind you that Life Planning is not a single step or a one and done process; it is a continuous process…which must include your overall insurance plan. For many families, as their wealth continues to accumulate over the years and circumstances change, adjustments need to be made in the foundation of their pyramid. For this reason, it is crucial to review your insurance/risk management with your Life Planner on a regular basis.