SHARMA ASSOCIATES, INC.

A good financial plan begins with your Insurance safety net.

Other important components of a good financial plan are planning for retirement, college education and estate planning.

Sure, it is much more exciting to talk about hottest stock or mutual fund. But before you think of investing or invest in stock market, it is important that you make sure you are properly insured.

Because insurance plays such an important role in protecting you and your family from catastrophic losses, it should not be get less importance in your financial planning process. Proper financial planning means you have the right policies and enough coverage to create a safety net for you and your family.

The most important insurance policies cover your life, your health and long-term care, your income (disability), your home and cars. It insulates you from liability and can also make up for income you lose, if you are disabled.

Not being properly insured is a huge risk, yet significant number of individuals does not want to address their insurance needs. If you are like most people, you would probably rather save, spend or invest the money you would have to pay for insurance premiums. But do not fall prey to that short-term thinking. You would be glad to be covered if tragedy struck.

Having the right kinds of insurance can make a huge difference in both the quality of your life and the contents of your wallet or estate. Here are the types of insurance you need to have to avert financial disaster.

LIFE:

If anyone depends on your income to live, you need life insurance, Period. Term life insurance, a set amount of coverage for a given period, is generally your best choice. WHY? Lower premium allow you to free up cash for other things, such as investing for college tuition or your own retirement. Besides term life insurance other life insurance products are: Universal Life Insurance, Variable life Insurance and Whole Life Insurance.

HEALTH:

Almost everyone needs health insurance. Without insurance, paying hospital or doctors' bills could cost you thousands of dollars a year. For example, having a baby costs between $6,000 and $10,000. And if you suffer from a serious illness like cancer or need organ transplant, it could wipe you out. So be sure you understand what your policy covers and what you may be charged out of pocket.

LONG TERM CARE:

This is another insurance product one should seriously look into.

DISABILITY:

Often overlooked is proper disability insurance. It protects your income in the event that you are injured and can no longer work. Typically it should give you at least 60% of your gross income should you be unable to work.

HOMEOWNERS:

Make sure you have proper homeowners insurance. That generally means replacement value coverage for the house, and liability coverage in case somebody gets hurt on your property and sues you. If you want to keep your premiums to a minimum, take a higher deductible.

If you live in a flood zone, be sure you are insured. Your homeowners policy may not cover flood damage. If so, you will need a separate policy.

And renter's insurance is a must for folks who lease an apartment from a landlord. It covers loss of property and, if you cause the damage then liability.

AUTO:

Adequate auto insurance will pay for replacing your car, but it should also give you liability coverage of at least $100,000 per injury and $300,000 per accident. This protects your assets from others who sue you for damages.

INSURANCE AS AN INVESTMENT:

Often life insurance is sold as both a safety net and as an investment. Insurance is not the most efficient investment, But if you have exhausted other retirement vehicles, like 401(k)s, etc then it can be an investment.

INSURANCE As AN ESTATE PLANNING TOOL:

Insurance can be an effective estate-planning tool. You can use it to protect your assets. A life insurance policy, for example, can be used to pay estate taxes. This can be godsend to a family that would otherwise have to sell a home or a business to pay Uncle Sam. A business partner can use it to buy out the ownership interest of the deceased.

INSURANCE YOU DON'T NEED:

Call it a response to the need for safety, but too much insurance is as much a problem as too little.

Today you can buy coverage to protect you against cancer. You can purchase a policy that pays off your mortgage if you die. Lose your job and there is a policy to pay off any debts that you have incurred on your credit card. None of this insurance is necessary. Likewise, it is better to have adequate life insurance than to pay for mortgage insurance. You also do not need to insure your credit cards against theft. Federal law limits your liability to $50 for each account, if you report your cards lost or stolen. The same goes for getting coverage for any unpaid balance in case you die. Your estate can take care of that.

On an average household expenditure for insurance is between 6.5 to 7.5% of the household income.

Should you have a question or need more information, please feel free to call or email.

Phone: 610-828-8253,

Email: hans@sharmah.com