Now that you know what kind of lifestyle you seek and what it takes to get there, it’s time to figure out a protection plan.
This is something you won’t hear in a TED Talk or by any get-rich-quick schemers. Protection of your assets is every bit as important as acquisition.
When you build that surplus or superfluent lifestyle, but eschew things like insurance or umbrella policies, you’re building a castle without a moat. I’ve seen this happen to far too many entrepreneurs: they finally have themselves on track for a cushy “Entire-ment,” but one malady or illness sets them back indefinitely.
The worst thing to happen, especially later in life, is to lose that lifestyle you’ve worked so hard to save for.
The Value of Insurance
Insurance may be the least sexy topic I could talk about, but it’s one of the most important.
Think about it, every entrepreneur is working and building their business so that one day they don’t HAVE to run the business. They are building their business, income and eventually their personal balance sheet enough so that they can one day have financial independence.
But for today’s purposes, let’s focus on the health of your personal balance sheet, your castle. If we could roll the clock back hundreds of years to medieval times when nobles built large manors and castles, we would see how they protected what they had. Long before they would move their wealth to a new location, they built a wall and set up defences...before moving their assets. Your personal balance sheet (castle) is the money you won’t end up touching for years, but will serve as the bedrock of your post-grind era.
Too often, we don’t really examine the value and necessity of insurance (moat and walls) until it’s too late. The simple truth is that you will need quality disability insurance. You will need an umbrella policy and life insurance, so your children and other family members can have that financial capital replace the income and lifestyle that you were creating with your human capital.
It may have taken you decades to have finally squared away enough savings and investments to be on track for financial independence where you have all of the luxuries you’ve ever desired, but illnesses don’t exactly discriminate. Without quality protection, you could end up using all of your current balance sheet to fund your lifestyle or keep your business alive in your absence. Studies show that 90 percent of disability claims are due to sickness. You need to be prepared for all situations.
Many entrepreneurs usually believe at least one of two major fallacies: that they’re already covered or that they’re bulletproof. Unfortunately, while the former is rarely true, the latter almost never is.
No matter how healthy you are or how many zeroes are on your balance statement, you need to plan for worst-case scenarios. That’s where having a sound insurance plan comes into place.
Don’t Trust Salespeople
What many people are afraid to admit is that they have no idea how insurance really works. Their limited interactions have come when they’ve needed to purchase health insurance or auto insurance.
I’ve got a rather uncomfortable truth for you. The people selling you these policies may not have your long-term fiscal wellness in mind. Industry statistics show that most people who purchase an insurance a policy from an insurance agent, have no substantial planning conversation with them about their planning afterward.
At the end of the day, you’re a customer, not life-long clients. Most insurance companies have incentives that cause agents to spend most of their time attracting new clients, rather than taking care of the clients they have. You go into these meetings with questions about coverage and price points, but not the “What happens if…” scenarios they’re ill-equipped to answer.
Far too many people take their cues from companies selling them insurance instead of a trusted advisor. Your financial advisor should be the one guiding your insurance decisions, not a salesperson.
The major difference is that your advisor has your long-term wellness in mind. They’ll be able to look into the future, based on your current investments, and steer you clear of any potential roadblocks up ahead. They’ll tell you exactly what you need for long-lasting financial health and would provide you all the information you need so you can go into those insurance meetings with knowledge instead of fear.
Insurance may not be the most exciting thing you invest in, but it’s something you will appreciate for years to come.