Insurance as Part of Your Investment Plan

  • Insurance is an important part of retirement and legacy planning.
  • Life insurance, disability insurance, and long-term-care insurance can play a significant role in helping preserve and achieve your financial goals.

Nobody’s favorite topic

Skimping on insurance or putting off coverage decisions until later is common – and reasons for it aren’t hard to come by.

Although insurance is, by nature, an uncomfortable thought – one steeped in life’s unknowns – it plays an integral role in a well-rounded financial strategy.

Protecting your path

Think of insurance this way:

You’re heading toward retirement on a road – your personal savings. The well-financed route may be your path to the future – your retirement plan. It twists and turns along the way as you pursue goals and dreams, handle living expenses, and deal with life’s detours.

But what happens if your path is cut short by an untimely accident or illness? Or wiped out by the death of you or your spouse and the accompanying loss of an income stream? Or if life events or health issues force you to change course or redirect savings toward unexpectedly lengthy detours from your planned path forward?

When planned wisely, insurance can help cover the expected and unexpected events on life’s journey.

That’s where insurance can come in. When planned wisely, insurance may help cover the expected and unexpected events on life’s journey – and help you stay on course financially.

Life insurance

Putting off life insurance decisions is more than just a coverage risk. It could also cost you considerably more in the long run. Almost without exception, insurance may be more affordable when you’re younger and healthier. Typically, the older you are or the more health issues you face, the steeper your premiums may be, if you are able to obtain coverage at all.

Life insurance comes in two forms: term and permanent. The first, as its name implies, provides financial protection for a limited period of time, usually 10, 20, 30 years. Permanent life insurance, on the other hand, provides protection throughout your lifetime as long as premiums are paid. With permanent policies, you may be able to build equity, or “cash value,” over time.

Depending on the type of policy, the cash value can potentially grow, tax-deferred, and may be accessed through tax-free withdrawals and/or loans.

It offers other potential financial options and benefits:

  • Funding source for major life purchases or expenses such as a home purchase or small business build-out
  • Flexible retirement spending
  • Loan collateral
  • College savings – especially since it’s typically not considered an asset in federal college financial aid calculations and could help you qualify for more aid
  • Long-term care premiums (through a tax-free 1035 exchange)
  • Income tax-free legacy funds

Disability insurance

More than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age1.

A disability claim during your working years can seriously impede your income stream – even dry it up. According to the Council for Disability Awareness, more than one in four of today’s 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach the normal retirement age1. The average individual disability claim lasts 34.6 months.2

An insurable disability can include any condition that makes it impossible for you to perform your work duties – everything from a back injury to depression to cancer.

If you’re covered under a group disability policy, you’re typically eligible for up to 60% of your salary, but payouts may not start immediately. To make up for losses during a group policy waiting period as well as the remainder of your income once payouts begin, you’d need coverage under a supplemental disability insurance policy.

Keep in mind, group policies are often hampered by qualifiers. For example, “own occupation” policies pay if you’re unable to perform your current job duties. “Any occupation” policies, on the other hand, only pay out if you can’t work in any job deemed reasonably suitable for you.

If you don’t have the financial means to live comfortably without income until you retire should you ever become disabled, you may want to consider disability policies that last until at least age 62.

Long-term care insurance

As life expectancies continue to climb, the probability you or your spouse will require home health care or nursing-home care may be greater than you think.

While most people are aware of rising health care costs, many have not prepared adequately for the risk of substantial long-term care costs arising in the future – costs Medicare doesn’t cover.

The average cost of a nursing home stay is $82,1283 annually for a semi-private room.

For many – if not most – people, long-term care coverage is the best way to help protect against potentially devastating costs of extended care later in life. Like some other types of insurance, purchasing early may lead to savings down the road.

A critical planning component

Next time you review your retirement plan, don’t forget to consider your insurance needs. Life, disability, and long-term care insurance can all help protect your financial goals to and through retirement and beyond.

Next steps

  • Determine your insurance needs.
  • Ask a financial professional for help finding the right insurance coverage for your needs.

1Social Security Administration, Disability and Death Probability Tables for Insured Workers Born in 1997, Table A.
2, Cost of Care,

Insurance products are offered through non-bank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.

Wells Fargo Advisors is not a legal or tax advisor.