Opinion: Insurance exists for reasons of life, risk

Ryan J. Hurn

"Life is what happens to you while you’re busy making other plans.” —John Lennon, “Beautiful Boy”

The daughter of a friend recently asked if I would do an interview with her for a college financial course she is taking. Several of her questions pertained to the importance that insurance plays in an overall financial strategy. The questions were well thought out, and I believe that sharing a few would be a good refresher on a subject that is paramount to any successful financial strategy and often not given its necessary due when preparing for your financial future.

I hope that these questions and answers will spark a review of your own insurance portfolio and encourage you to make any necessary adjustments as you continue moving toward your personal and business goals.

You may not need to take action at the moment, but it’s good to routinely take stock of what you have, as well as why you have it.

1. How do you define insurance?

Insurance is a financial tool designed to lessen or eliminate financial loss. There are various modern policies that integrate additional components, but fundamentally, insurance is designed to mitigate or eliminate financial loss.

2. How do you define risk?

There are many types, including property and casualty risks; loss of income due to premature death; the risk of extended health, disability or long-term care events; risk of running out of money; risks associated with investments; credit risk; inflation risk; and liquidity risk. However, one area of commonality among all degrees of risk is this: If the event occurs, you will experience a negative, and potentially devastating, impact on the important areas of your life. In my eyes, not addressing risk is to flirt with disaster.

3. What is the best risk management strategy?

 One way to manage risk is to not take it on; however, that’s rarely how life works, and there is no way to completely remove risk from any meaningful endeavor. The second-best way is to have the resources and tools in place that will allow you to get through a period of loss with the least amount of hardship in your life and the lives of your loved ones.

4. What are some of the benefits of having insurance?

In addition to addressing a specific risk with a policy, there are other benefits to having a well-designed insurance portfolio as part of your overall financial strategy. A solid insurance portfolio may offer potential tax benefits, serve as leverage in an estate planning framework or as part of a comprehensive employee benefits package to help attract and retain workers.

5. If you were to only have one type of insurance, what would it be?

Unfortunately, there is too much risk in the world to carry only one type of insurance. A young, married couple with children, a mortgage, two car payments and a student loan have a very different financial situation – and therefore risk exposure – than someone in their 60s who is retiring next year with little to no debt or dependents and will be living on a fixed income.

Lastly, in today’s world, there is no shortage of resources providing information on whatever topic it is that you are seeking information on, and that certainly includes financial topics.

Consequently, it means there is no shortage of people giving financial opinions that have no professional qualifications to do so.

When it comes to your financial life and the decisions you make, be thoughtful and attentive to where the information comes from.

Regardless of what the “gurus” on Tik-Tok may say, there is no one-size-fits-all financial answer that will work for each person; every situation is unique and will have a solution, or set of solutions, that is specific to it. Learn to ask the right questions about your personal finances. If you don’t know the right questions to ask, find someone who is qualified, experienced and trustworthy to aid in asking the right ones for you.

Ryan J. Hurn is an agent with New York Life Insurance Co. and a financial services professional for NYLife Securities LLC. He can be reached at rhurn@ft.newyorklife.com.