A sound financial plan must address the insurance coverage you, your spouse, and family members may require.
While health-related insurance plans may be expensive, trying to pay medical costs out of your own pocket, or not seeking medical assistance when needed, can cost much more.
- Life insurance is used to pay for funeral expenses, repay outstanding debts, make charitable donations, and provide living expenses for surviving family members. It can also be used to cover estate taxes and probate fees to enable your estate to be liquidated in the most appropriate manner. Most importantly, life insurance can hedge against the loss of human capital (read Human Capital definition appended below).
- Disability income insurance§ is to help partially replace income of persons who are unable to work because of sickness or accident. The reality is only 13% of disabilities are due to injury. (Source: National Institute on Disability and Rehabilitation Research, Disability in the United States Prevalence and Causes, 1992). In terms of its financial effect on the family, a long-term disability can be just as severe as death. Disability income protection can come from several sources: social insurance programs, employer-provided benefits, and individually purchased policies.
- Health Insurance§ protects against the risk of incurring medical expenses among individuals. You may enroll through your employer via a group health plan, purchase an individual health plan, or enroll in government programs (if eligible).
- Long-Term Care Insurance is a relatively a new type of insurance product. Many people do not understand what Long-Term Care insurance policies cover, how and when the policies provide a benefit, and who should obtain coverage.
§Products available through one or more carriers not affiliated with New York Life, dependent on carrier authorization and product availability in your state or locality.
Hedge Against the Loss of Human Capital:
When you think of your net worth, what investments typically come to mind? If you’re like most investors, you might include stocks, bonds, real estate, and cash. Those investments, also known as financial capital, each play a role in your portfolio, but you’re worth much more.
For a true account of your total economic wealth, you should include your “human capital,” in addition to your financial capital. Human capital is the present value of expected future labor income; in other words, it is your earnings potential.
Your human capital can increase your total net worth dramatically. Like traditional assets, human capital also has a certain risk profile, ranging from stable and low-risk (bond-like), as in the case of a tenured university professor or government employee, to risky and volatile (stock-like), such as a commissions-based stockbroker, freelance consultant, or an entrepreneur.
With the help of pioneering research firm Ibbotson Associates, we can explore how your human capital affects your financial portfolio, take steps to protect it, and make more informed investment decisions to manage your total wealth throughout your lifetime.
Mary Anne would like to sit down with you to discuss this concept further, review some questions that will help determine whether your human capital is properly protected, and identify how to incorporate your human capital into your investment strategy. Please call her office at (919) 781-3100, extension 7112 to schedule an appointment.