When people think of a financial plan, they often think about how their income, spending, savings, debt, and investments impact their short- and long-term goals and ability to build wealth. But as you build your wealth, you also need to take steps to help protect it from certain life events outside of your control that could result in financial losses.
Having different types of insurance policies can help protect you against life’s unexpected moments, such as property damage, auto accidents, health problems, or even death. Insurance can help turn large, unexpected financial losses into smaller, more manageable costs, helping you keep your savings working toward your long-term goals while potentially reducing the need to take on debt.
Understanding the role insurance plays in your broader financial plan can help you protect what you’ve built and reduce the financial impact unexpected events could have on your long-term goals. We’ll explore how different types of insurance can help protect your finances, where they fit within your broader wealth strategy, and key considerations for determining whether your coverage aligns with your needs and goals.
Why Disability Insurance Matters When Your Income Is at Risk
In a perfect world, we imagine ourselves as always being healthy and physically able to work. However, the reality is that at some point in our lives, many of us may become sick or injured and potentially be forced to leave the workforce, either for the short term or long term. When you are not able to work, you may also lose some or all of your regular income, which means you may have to rely on savings or other financial resources to pay your bills.
This is where disability insurance can be helpful. A disability insurance policy can replace a portion of your income if you can’t work for an extended period because of a qualifying illness or injury. Two common types are short-term and long-term disability insurance. Short-term disability insurance typically replaces between 40% and 70% of an employee’s salary and may last between three and six months.1 Long-term disability insurance generally replaces a portion of your salary for a longer period of time. Depending on the policy, benefits may end when your disability ends, after a certain number of years, or once you reach a certain age. Your waiting period can also vary, so it’s important to review the terms of your policy to fully understand your coverage.
Outside of private insurance, you may also have financial protection through Social Security Disability Insurance (SSDI). SSDI provides benefits to people who meet certain work history requirements and have a qualifying disability that prevents them from working for at least 12 months or is expected to result in death. If you continue working, Social Security also considers whether your earnings exceed its Substantial Gainful Activity (SGA) threshold. To learn more about whether you may qualify for SSDI, visit the Social Security Administration website.
Planning for Health and Long-Term Care Costs
Similar to disability insurance, health insurance can help pay for medical costs that could otherwise become a significant expense if you had to pay for them entirely out of pocket. Routine preventive care, such as annual physicals and certain screenings, may be covered in full depending on your plan, while other services may require you to pay a copay, coinsurance, or deductible. Insurance can also help pay for more serious and unexpected health concerns, such as a hospitalization or surgery.
Furthermore, insurance can help you prepare for health-related costs that may become more significant as you get older. Long-term care insurance can help pay for certain medical and personal support services if you cannot live independently or need assistance with everyday activities. Depending on your policy, these services may include assisted living, home care services, or adult day care. Having this type of insurance can help offset long-term care costs that might otherwise need to come from your retirement savings or other assets.
Many people assume they will be covered by Medicare when they get older. However, Medicare generally does not cover ongoing long-term custodial care, such as help with everyday activities. It may cover certain short-term skilled nursing care, rehabilitation, and other medically necessary services if you meet specific requirements. Because your age and health can influence both your eligibility for long-term care insurance and how much you pay for it, it can be helpful to consider your options before you actually need care.
Life Insurance and Your Family’s Financial Future
You likely have an estate plan integrated into your broader financial plan. But your estate plan may extend beyond your will, trust, and powers of attorney. Life insurance can also play a role, particularly when it comes to financially protecting the people who depend on you.
Unlike some of the other types of insurance we’ve discussed, life insurance is not designed to provide immediate protection for you. Rather, it is intended to provide financial support to your beneficiaries after you pass away. With a life insurance policy in place, you can help your family afford immediate costs after your death, such as funeral and burial costs, outstanding medical bills, and other debts. They may also be able to use the money from your policy to help replace the financial support you previously provided. This could mean anything from making mortgage payments and paying tuition to helping preserve or continue a business you’ve created.
Life insurance death benefits are generally paid to your beneficiaries free from federal income tax, although certain exceptions can apply. How much coverage you need and how the proceeds fit into your estate plan will depend on your financial circumstances, the people who depend on you, and what you want the money to accomplish after your death.
Protecting Your Assets with Home, Auto, and Liability Insurance
When you own property, accidents and unexpected damage can happen. Your car could be damaged in an accident or storm, while your home could experience water damage, storm damage, fire or another covered loss. If you have a mortgage, your lender will also typically require you to maintain homeowners insurance.
Homeowners and auto insurance can help protect more than the physical property itself. Depending on the policy and circumstances, liability coverage may provide financial protection if you are legally responsible for someone else’s injuries or property damage. Homeowners insurance may also provide coverage for certain losses related to theft or damage to personal belongings, subject to the policy’s terms, limits and deductible.
For individuals and families who have accumulated significant assets, liability protection can become an especially important consideration. An umbrella insurance policy, for example, can provide additional liability coverage above the limits of certain underlying policies. Together, appropriate property and liability coverage can help reduce the financial impact of significant losses or claims that could otherwise put your accumulated wealth at risk.
Thinking of Insurance as a Piece of Your Financial Plan Puzzle
A comprehensive financial plan needs multiple pieces of the puzzle to be connected and working together. Insurance is one piece of that puzzle. Having the right policies in place can help protect you from unexpected events that impact your finances and potentially disrupt your progress toward your goals. Yet, choosing the right coverage is not always an easy task to do on your own.
Our team can be a resource to help you understand how your insurance coverage fits into your broader financial picture. By looking at your income, assets, liabilities, family needs, and long-term goals, your advisor can help identify potential gaps or areas of financial risk and work with your insurance professional to determine whether your coverage continues to align with your needs. This can also help make sure your insurance costs are considered alongside your other financial priorities rather than separately from them.
As your life and financial circumstances change, your insurance needs may change too. If you’re interested in exploring whether your insurance policies are properly integrated into your financial plan, please reach out to our team. We would be happy to review your broader financial picture with you.
[1] Luther, J. (2026, August 3). Short-Term vs. Long-Term Disability Insurance Explained. CO- by US Chamber of Commerce. https://www.uschamber.com/co/run/finance/short-term-vs-long-term-disability“
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