Don't Rock Climb Without a Rope

You probably wouldn’t go rock climbing without a rope—would you? Sure, it might add to the thrill, but it’s safe to say that most people would prefer to have a rope, just in case. The rope helps to manage risk in much the same way that certain insurance policies can.

Even financial professionals in areas like private equity, investment banking and asset management can have questions or reservations about the value of insurance. But in our view, insurance is just like the rope - it can be a lifesaver when it comes to your financial plan.

There are a few basic policies that I believe can help you manage your risk appropriately. Here are three that you might consider in order to help set yourself up for a successful climb to the top:

1. Umbrella insurance to cover legal risk

This policy is often overlooked but one that I believe can be one of the most beneficial, especially in today’s litigious society. Umbrella insurance, as its name would suggest, sits on top of your home and auto policies to help cover any lawsuits that may come because of an accident at your home or in your car. This policy can cover attorney fees and the actual settlement of the case.

In my view, for senior executives and high-profile people who are “Google-able,” this policy can be wise to consider. Generally, I believe having a policy that covers your total assets can be a good place to start.

2. Disability insurance to protect your income

One of the worst things that can happen is an accident that leaves you with a disability that prevents you from working in a similar capacity to what you do today. Disability insurance can help cover that risk. Many financial firms offer some level of disability insurance as a benefit to their employees, but it can also be bought in a separate policy.

Our experience suggests disability insurance should be analyzed in the context of your monthly budget to decide how large the policy should be. We believe that the coverage, alongside any passive income, should cover your basic living expenses.

3. Life insurance to take care of your loved ones

Life insurance comes in a variety of flavors that have practical uses based on unique situations. For most clients, we think of life insurance as a replacement for income if a family breadwinner experiences premature death. Commonly, the best policy to replace that income is term insurance, in our view. Term insurance is usually inexpensive compared to other life insurance policies and can cover this need during your working years. We find that its flexibility in terms of time and cost is very desirable.

All these insurance policies should be reviewed in tandem with your overall financial plan and with the help of an insurance professional. Once you review the options, we think you’ll see how insurance can help you feel more confident on your personal financial journey. So, before you embark on that climb, be sure to pack your rope!


Matt Kocanda

Matt Kocanda

Partner, Business Development Director, Wealth Advisor

Matt is a Partner, Wealth Advisor in our Itasca, IL, office. He serves as the personal CFO to families, private equity professionals, investment bankers and asset managers. Matt loves to help make the complex simple and help clients enjoy a full life.


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