Taken together, cash reserves and insurance coverage combine as the foundation supporting your structural financial plan. The goal here remains to preserve liquidity amid multiple scenarios, while also facilitating growth. Health insurance is a vital stopgap measure that shields your assets from bankruptcy in the aftermath of an untimely illness. Taken further, life insurance coverage provides for beneficiaries as part of a responsible estate plan. Onyx Investments remains prepared to make and help execute individual and group insurance policy recommendations, as part of the financial planning process. Our insurance recommendations carefully consider the value system of the individual client. Employee benefit packages reflect corporate culture, while estate planning is more so a family affair.
Clients pay premiums to insurance companies, in exchange for benefits amid emergency events that trigger payouts. Insurers profit by growing premiums over associated payouts by managing risks and making investments. With the help of actuarial software and technology, insurers can approve applicants during the underwriting process and set premiums, according to health risks. Similar technology is used to process and analyze the viability of your claim payouts. Billionaire Warren Buffett is most notable for his business acumen related to insurance “float,” where he invests insurance premiums at relatively high rates of return.
Credit rating agencies, such as Moody’s, Fitch Ratings, and Standard and Poor’s, use computer algorithms to analyze specific life insurers’ ability to make good on promises and claims. Onyx Investments takes these credit ratings into consideration, while helping our clients to comparison shop for insurance. We recognize that higher rated insurers do command higher pricing power. We are also aware of the fact that a credit rating is but one benchmark of value that is far from perfect. The credit rating industry has endured harsh skepticism in the aftermath of the 2008 financial crisis. The Big Three agencies failed to predict the collapse of Wachovia, Lehman Brothers, and Washington Mutual.
The financial services industry has created near infinite customization within the spectrum of insurance products. Individual health plans may be tailored to cover eye, dental, prescription drug, preventative care, counseling, and surgery expenses. Alternatively, life insurance benefits may be structured to directly pay off mortgage debt, tuition costs, and funeral expenses. Onyx Investments will help you to evaluate the merits of taking a one-time lump sum payout against collecting insurance benefits in a series of smaller payments over time. Insurance benefits, of course, must be managed with prudence. All estate plans carry built in risks of mismanagement, if heirs are not accustomed to operating with access to larger sums of money. Onyx Investments would then stand ready to teach the younger generation to appreciate the benefits of comprehensive financial planning.
Savings and Investments
High-deductible health insurance plans may be packaged with a savings component referred to as the health savings account (HSA). HSAs benefit consumers by offering tax advantages. HSA contributions are made with pre-tax money, which means that deposits are not subject to Federal income taxes. The health savings account does permit tax-free withdrawals, if the money is spent to meet qualified medical expenses. On the other side of the ledger, annuity and whole life insurance plans offer built in savings and investments. These products direct a portion of your premium payments into money market, bond, and mutual fund accounts. Specialized life insurance products maintain provisions that allow you to borrow against cash value, or annuitize the investment into a series of systematic payments upon retirement. Whole life insurance and annuities, of course, are complex agreements subject to surrender charges and tax penalties.