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Commentary: Taking Inventory of Your Insurance

It's easy to get excited when reviewing the performance of your portfolio; people like to see whether they've made money in the markets. During periods when the stock market has done well, especially recently, the excitement of looking at quarter...

Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings.
Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of “Your Money” on KLKS 100.1 FM on Sunday mornings.

It's easy to get excited when reviewing the performance of your portfolio; people like to see whether they've made money in the markets. During periods when the stock market has done well, especially recently, the excitement of looking at quarterly statements only seems to increase.

Do people have that same excitement when it comes to reviewing their insurance policies? Not so much.

We think that's a mistake.

Regularly thinking about and reviewing your insurance policies is the only way to make sure that you and your loved ones are adequately protected in case anything happens to you.

We recommend evaluating your life, disability and long-term care (LTC) insurance policies on a yearly basis. When doing so, consider the following for each type of policy:

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Life Insurance: Remember what your goal was when you first purchased your life insurance policy, as this likely dictated how much coverage and what type of policy (term versus whole) you bought. At that time in your life, your decision was based more on the need to cover loss of income for your loved ones. That specific need decreases as you approach retirement, but there are still valid uses for life insurance.

For example, an irrevocable life insurance trust may be useful as a method to transfer assets to your loved ones in a tax-efficient manner as well as provide an avenue to finance the fees involved with settling your estate.

Disability Insurance: Many people get their disability coverage through their employer. Typically, these group policies limit benefits to 50-60 percent of your salary and often carry a maximum monthly cap.

Major life events, such as the birth of a child or moving into a new home, could significantly increase your monthly expenses and could leave you underinsured if something happens and you can no longer work. Review how much coverage you can actually count on from your employer's disability insurance. If you feel underinsured, consider purchasing a policy on your to supplement your current coverage.

Long-Term Care Insurance (LTC): The good news is that you bought a policy and it is a contract of benefits. The bad news is that the premiums may have gone up. Since LTC is still a relatively new form of insurance, insurers made educated decisions based on anticipated claims and numbers of lapse policies over a long period of time. Each year they review statistics and make adjustments. In order to limit the increase on your policy, see if you can reduce the rate your policy adjusts for inflation annually.

A second option may be to continue paying your current premium, leading to a reduced amount of total benefits. If you currently have a policy that offers lifetime benefits, consider switching to a policy that covers you for a set amount of time.

Before you make that decision, it is important for you to know what type of coverage you have. Does it include in-home health care, assisted living and/or nursing homes? You'll want to be sure your policy still meets your projected needs.

Life, disability and LTC insurance all insure your most important asset: yourself. Review your policies regularly to make sure you're protected as well as you think you are.

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By Bruce Helmer and Peg Webb, financial advisers at Wealth Enhancement Group and co-hosts of "Your Money" on KLKS 100.1 FM on Sunday mornings. Email Bruce and Peg at yourmoney@wealthenhancement.com . Securities offered through LPL Financial, member FINRA/SIPC.

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