Although I agree that it is better to be approximately right than exactly wrong, there is a limit. Whenever I ask people which method was used to determine their insurance coverage, I often encounter either a blank stare or a confident statement like “It sounded like a good figure.”
This is strange. Would this person insure the value of his $500,000 house by $100,000 or over insure it (and overpay) to the tune of $1,000,000 and say “it sounded like a good figure”? Of course not! The house will be insured for its assessed value. My question is “What is your assessed value?” Do you have a method for determining the present value of your future income? Do you have a method of determining the cost of the obligations you have should you become sick, hurt or die?
Solution: Prepare a written Security Needs Analysis Plan. This should accurately determine your “assessed value” and allow you and your advisor to tailor an insurance plan to suit.
Mistake #2 – Ignoring risk management
Follow Us!