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Insurance Essentials: Protecting Your Family & Financial Future


Life is full of uncertainties, and the best-laid financial plans must account for the unexpected. Most families have several risk exposures that, without adequate protection, could result in devastating financial consequences. Any single risk, such as the death of a breadwinner, loss of income due to a disability, property loss or damage, major medical expenses, or a liability claim, could threaten a family’s financial future. Few families have the personal capital to cover a single risk, let alone multiple risks.

Fortunately, families can transfer all these risks inexpensively to an insurance company with the capital to protect them. In exchange for that protection, insurers charge premiums that are relatively inexpensive when compared to the potential costs of an unexpected accident, illness, or death.

In planning for the future, families need a range of insurance coverages to protect against all contingencies. A well-conceived family protection plan includes the right type and amount of coverage at a cost reflective of the protection it provides. While no one wants to pay too much for insurance, paying too little for insufficient coverage can be far more detrimental.

Here are the critical insurance essentials all families should consider to protect their financial future:

Life Insurance

The loss of a loved one is never imagined, but the loss of a family breadwinner should be considered when building a foundation for a secure financial future. The hard truth is that a family could experience devastating financial consequences without proper life insurance planning.

After the death of a breadwinner, the family has immediate cash needs. Final medical, funeral, and probate expenses could cost thousands of dollars. Some debts may need to be satisfied, and the family typically needs a lump sum to get through the immediate future until everything is settled.

The family’s ongoing income needs require the most significant injection of capital, and those needs tend to increase when a breadwinner dies. And family goals such as college education don’t suddenly disappear.

Disability Insurance

The odds of a disability resulting in a loss of income are far greater than the risk of premature death, yet many people still feel it will never happen to them. If you become disabled due to an accident or illness and are unable to work for several months or more, how will you replace your income?

Disability insurance provides income replacement with a tax-free benefit of up to two-thirds of your earned income. Finding the right disability coverage for your particular needs can be a bit more complicated than life insurance coverage, so it’s essential to work with an insurance professional specializing in disability insurance.

Health Insurance

If you work for an employer who offers health insurance for family coverage, you likely have this critical base covered. If you’re not participating in an employer-sponsored plan, finding comprehensive healthcare insurance should be a top priority.

If premium costs are a concern, you may want to consider a health savings account (HSA). This account, combined with a high-deductible healthcare plan (HDHP), allows you to set aside money on a pre-tax basis and pay for qualified medical expenses with tax-free dollars.

Homeowners Insurance

If you own a home with a mortgage, you most likely have homeowners insurance. However, you must have the right kind of coverage for optimal protection. Be sure to check that your policy covers total replacement costs and keeps pace with rising home values. At a minimum, opt for 120% of replacement costs.

Also, if you have acquired belongings and personal property since you took out your policy, make sure they are covered under it. Some items may need a special rider. Make sure that your items are covered for their replacement value, not their depreciated value. If you haven’t done so, videotape your home’s interior and its contents.

Auto Insurance

It’s common for people to focus on the collision and comprehensive components of their auto insurance coverage. So, the tendency is to choose the highest coverage with the lowest deductible to lower premium costs. However, most people can afford a $1,000 deductible payment but can’t afford the risk of multiple liability claims.

It might make more sense to protect against the risk that could result in the most financial harm by increasing your deductible and redeploying the premium savings to obtain maximum liability coverage. That includes maximizing the amount of uninsured/underinsured motorist coverage.

Umbrella Insurance

Many unfortunate people are discovering that their most significant risk exposure is not the cost of repairing or replacing their home or car. The far greater risk is the potential cost of a liability claim associated with personal injuries resulting from an accident on your property or while driving your vehicle.

Most auto and homeowner policies limit liability coverage to $300,000. For just a few hundred dollars a year, you can purchase a $1 million umbrella liability policy as an extension of your existing liability coverage. The policy will cover any portion beyond your existing coverage, as well as the legal costs for litigating the claims.

Determining the right types and amounts of insurance coverages for your family protection plan depends on factors such as family size, the amount of assets and income you need to protect, your health situation, and age. It’s essential to work with an objective insurance professional to evaluate your needs and craft a complete insurance plan to ensure your family’s financial future is protected.

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.