The Role of Asset of Protection and Your Investments
Protecting your assets is directly tied to protection of everything, including you, through insurance. Without proper protection your investments and assets can face premature liquidation. Insurance in its many forms serves to offset risk, whether it’s health insurance, home owners insurance, or any other type of liability protection and income replacement. This article is not intended to ‘sell’ you the idea of insurance, but outline why and when it’s appropriate.
Many of us know the foundation of insurance is to protect ourselves, and those we love. The insurance many of us associate with this protection is life, medical and disability, homeowners, and auto insurance to name a few. But have you ever considered the ‘why’ behind insurance to protect assets?
Because none of us can control getting sick, hurt, having an accident, or experiencing a fire in our home, planning for expenses or loss is a good idea. Without proper insurance, you are more likely to liquidate your assets and even your investments if you don’t have proper insurance coverage in place. If you haven’t considered the reason to have insurance, or had the discussion with your financial advisor, you may be missing something important in your financial planning process.
Additional reasons to have insurance, besides the ‘protection’ aspect, is for estate transfer, business buy-sell, and other tax planning strategies where insurance may be a solution to help protect asset liquidation. An example of this is insurance used for estate planning and asset transfer purposes, where insurance benefits offset the taxes that your beneficiaries may have to pay for receiving the proceeds of your estate.
Liability coverage to protect your assets is important, and even more so if you’re a high net worth individual. If you are, consult an attorney regarding setting up business entities to protect certain assets. An example of this, would be if you own an airplane for business and want to protect your other assets in case of an accident resulting in multiple injuries or deaths related to your airplane. Sheltering your other investments by having the ‘airplane’ as a separate business can accomplish this in most situations.
If you’re a business owner, and plan to transfer a business to a family member or key employee, part of the transfer can be paid through insurance proceeds. To fully understand insurance used for this purpose, or for any tax planning strategy, consulting a tax professional and attorney is recommended.
As your financial advisor, understanding if your insurance coverage is appropriate and enough will be a part of your financial planning process and help me make recommendations for you. Regardless of where you purchase your insurance, ensuring you have it is one way to protect all of your assets and your investments.