A Financial Wellness Primer
We most often think of wellness in the context of our health and there is a lot written about “wellness” these days, certainly in these post-pandemic times. The focus on health and wellness has never been more evident.
The Global Wellness Institute defines wellness as “the active pursuit of activities, choices and lifestyles that lead to a state of holistic health”. They have further stated that wellness is about more than just physical health. Most models of wellness include at least six dimensions (and sometimes up to 9 or 12):
Physical: Nourishing a healthy body through exercise, nutrition, sleep, etc.
Mental: Engaging the world through learning, problem-solving, creativity, etc.
Emotional: Being aware of, accepting and expressing our feelings, and understanding the feelings of others.
Spiritual: Searching for meaning and higher purpose in human existence.
Social: Connecting and engaging with others and our communities in meaningful ways.
Environmental: Fostering positive interrelationships between planetary health and human actions, choices, and wellbeing.
The National Institutes of Health adds another dimension to wellness which is the subject of this discussion.
Financial Dimension
- Managing your resources to live within your means, making informed financial decisions and investments, setting realistic goals, and preparing for short-term and long-term needs or emergencies.
- Being aware that everyone’s financial values, needs, and circumstances are unique.
As I prepared to write this article, I googled “Financial Wellness” and came up with hundreds of hits that were worth exploring. The following link to the Forbes article, while fairly basic, pretty much summed up exactly what financial wellness means… “Practicing financial wellness means learning how to build a budget, use debt, save enough, invest properly, and use insurance. It means incorporating these skills in your day-to-day life so you can meet their present and future goals”.
Price Waterhouse Coopers (PwC) has even built a technology platform for employers called Financial Wellness, a PwC Product empowering employees to enhance their financial wellness.
Beyond the employer setting, however, it is challenging to navigate the complexities and the variety of choices available in the marketplace without financial guides, and often the financial planner may need the support of an insurance professional to provide the needed guidance.
The Essential Role of Health, Long-Term Care, Life, and Disability Insurance in Financial Wellness
In the realm of personal finance, securing financial wellness extends beyond accumulating wealth and managing expenses. It encompasses a holistic approach that includes safeguarding against life’s uncertainties. Health, long-term care, life, and disability insurance are fundamental components of this strategy, each playing a critical role in ensuring financial stability and peace of mind. By integrating these types of insurance into financial planning, individuals can protect themselves and their loved ones from significant financial disruptions.
Health Insurance: The Bedrock of Financial Security
Health insurance is arguably the most crucial type of insurance for maintaining financial wellness. Medical emergencies and healthcare costs can be exorbitant, and without insurance, even routine medical care can strain personal finances. Health insurance provides coverage for preventive services, treatments, surgeries, and medications, significantly reducing out-of-pocket expenses.
Moreover, health insurance often includes preventive care, which is essential for maintaining overall health and preventing serious illnesses that could lead to more extensive and expensive treatments. Regular check-ups, vaccinations, and screenings help detect health issues early, leading to better outcomes and lower healthcare costs over time.
Long-Term Care Insurance: Protecting Future Financial Stability
As life expectancy increases, the likelihood of needing long-term care also rises. Long-term care insurance covers the costs of services such as nursing home care, home health care, and assisted living, which are not typically covered by health insurance or Medicare. These services can be extremely expensive, and paying out-of-pocket can quickly deplete savings and retirement funds.
By investing in long-term care insurance, individuals can protect their assets and ensure they receive the necessary care without compromising their financial independence. This type of insurance is particularly important for those who want to avoid burdening their families with the high costs of long-term care.
Life Insurance: Securing Loved Ones’ Financial Future
Life insurance is a pivotal component of financial wellness for individuals with dependents. In the event of the policyholder’s death, life insurance provides financial support to the surviving family members. This support can cover daily living expenses, mortgage payments, education costs, and outstanding debts, ensuring that the family’s financial stability is maintained.
There are various types of life insurance, including term life, whole life, and universal life insurance, each offering different benefits. Term life insurance provides coverage for a specific period, making it a cost-effective option for those seeking temporary protection. Whole life and universal life insurance offer lifelong coverage and the added benefit of cash value accumulation, which can serve as an investment or savings component. Additionally, many life insurance policies also offer long term care riders, allowing policy holders to bundle BOTH life insurance and long term care into one policy.
Disability Insurance: Safeguarding Income and Lifestyle
Disability insurance is essential for protecting one’s income in case of an illness or injury that prevents them from working. The loss of income due to disability can be financially devastating, affecting the ability to pay for everyday expenses, debts, and future financial goals.
Short-term disability insurance provides coverage for a limited period, usually up to six months, while long-term disability insurance extends coverage for longer durations, potentially until retirement. This insurance ensures that individuals can maintain their standard of living and meet their financial obligations even when their earning capacity is compromised.
Integrating Insurance into Financial Planning
For comprehensive financial wellness, it is crucial to integrate health, long-term care, life, and disability insurance into one’s financial plan. Here’s how:
- Needs Assessment: Evaluate personal and family needs to determine the appropriate types and amounts of insurance. Consider factors such as age, health status, financial dependents, and long-term financial goals.
- Research and Selection: Compare different insurance policies and providers to find the best coverage at a reasonable cost. Ensure that the chosen policies align with specific needs and provide adequate protection.
- Periodic Review: Life circumstances change, and so do insurance needs. Regularly review all insurance coverage to ensure it remains relevant and sufficient. Major life events such as marriage, the birth of a child, or a job change are good times to reassess insurance needs.
The Peace of Mind Factor
The ultimate benefit of incorporating these types of insurance into financial planning is the peace of mind they provide. Knowing that you are protected against significant financial risks allows for greater focus on other aspects of financial planning, such as saving and investing, and enhances overall financial well-being.
Conclusion
Health, long-term care, life, and disability insurance are integral to achieving and maintaining financial wellness. They provide crucial protection against unforeseen events that could otherwise derail financial stability. By thoughtfully incorporating these insurance types into a comprehensive financial plan, individuals can safeguard their financial future, ensuring resilience and peace of mind in the face of life’s uncertainties. In the pursuit of financial wellness, these insurances are not just optional add-ons but essential pillars supporting a secure and prosperous future.
AgencyONE is a full service brokerage general agency that works with financial planners nationwide to help secure the financial wellness of their clients. Whether it is life, long term care or disability insurance, AgencyONE has the knowledge, experience, carrier relationships and expertise to work with you and your clients to create the comprehensive financial plan required to secure their “financial wellness”.
Please contact the AgencyONE Marketing Department at 301.803.7500 for more information or to discuss a case.
