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Chapter 2. Examine and Diagnose: Determi... > The Role of Insurance in Financial P...

The Role of Insurance in Financial Planning

The fundamental objective of insurance is to provide a means to offset the burden of financial loss. Think of insurance as an alternative method of dealing with risk. You are paying an insurance premium (small cost) to avoid paying the total cost for a catastrophic loss (such as your house burning down).

A sound insurance program should answer the “what ifs” in your life. For example:

What if you were faced with a major medical expense or nursing home confinement? (health and long-term care insurance)

What if you were unable to work for a long period of time due to a severe illness or accident? (disability insurance)

What if someone injured themselves on your property? (homeowner’s insurance)

What if a fire destroyed many of your personal possessions? (homeowner’s insurance)

What if you were involved in a severe automobile accident? (auto insurance)

What if you were to die tomorrow? (life insurance)



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