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Why insurance is essential to strategic financial planning
June 8, 2022 at 7:00 AM
A plant falling into someone's palm.

Strategic financial planning is complicated and requires evaluating the totality of your financial situation, and insurance is an essential component of financial planning. However, understanding why can be difficult. Fortunately, we are here to help you navigate your financial future with renewed confidence.

Here is why having adequate insurance is absolutely essential to financial planning:

Tax benefits

Insurance policies offer significant tax benefits for financial planning. Optimizing your tax strategy and mitigating what you owe is essential to effective financial planning.

Procuring insurance can be a significant asset to your tax strategy and financial health. For example, the premiums you pay on life insurance are tax-deductible. Moreover, financial planning is about more than just your well-being.

The maturity and death benefits people receive from your life insurance policy are often exempt from taxation, which relieves significant stress for your loved ones. Similarly, the premiums you pay on health insurance are also tax-deductible.

These tax deductions are essential to maximizing savings, optimizing your financial planning strategy, and positioning yourself for future success.

Unforeseen expenses

You cannot account for every possible situation. There is always the potential for significant, unexpected expenses. Unforeseen expenses can derail and halt your financial planning progress, and they can even set you back.

Ultimately, there are many things in life you can’t anticipate, like medical emergencies and critical illnesses. Without insurance, hospital bills are a significant expense that puts people in sizable debt, which is detrimental to your financial planning efforts.

Similarly, when driving, you can never anticipate an accident, and car insurance protects you from liability for injuries you and your passengers sustain and damage to the investment your vehicle represents. Lawsuits, car repairs, car replacements, and more can set you back significantly.

Moreover, liability insurance and homeowners insurance are also critical. These protect you if someone sustains an injury on your property or a disaster damages your house. Unforeseen expenses can undermine all financial planning efforts, so insurance should be non-negotiable.

Income protection

Another crucial benefit insurance offers when financial planning is income protection. Losing income can severely restrict or even stop financial planning strategies.

Disability insurance is a lesser-known coverage that secures your income in the event of accidents and illnesses. This coverage is essential to maintaining a steady source of income, which is crucial to adhere to your financial planning strategy.

While withdrawing from your 401(k) or 403(b) can be a solution, you should avoid this at all costs as it can do more harm to your financial future than good. Withdrawals are subject to income taxes and an additional 10% penalty if you are under 55 years old.

Still, financial planning means more than securing income for yourself. Financial planning ensures your loved ones are taken care of. Life insurance guarantees they can maintain their standard of living, repay debts, and fund their education in the event of your demise.

Call now to get started!

If you are interested in strategic financial planning, insurance is an indispensable asset to securing your financial future and positioning yourself for success. Fortunately, at OWLFI, we are the premier financial planning firm in Lenexa, KS, and we can help you procure the perfect, tailored coverage to optimize your financial health. Your goals are our goals, and we can’t wait to achieve them together. Call now to get started!

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