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Using Insurance to Transfer Risk

If you ask a homeowner, replacing a roof is probably the least satisfying expense they will ever face. While the value of such an investment is obvious, it doesn’t provide quite the satisfaction of new landscaping. Yet, when a hail storm comes, ask that same owner if they would have preferred nice flowers or a sturdy roof.


Insurance is a lot like that roof.


It's not a terribly gratifying expenditure, but it offers peace of mind for financial storms that may affect your life. Some financial storms such as car accidents or hail damage to your roof are more widely known. Others, such as becoming disabled or needing long term care come up less in conversations and the news.

Little blue house in tall green grass being protected from rainstorm by a large hand representing insurance
Protect the wealth you’ve built with proper insurance.

Identify, Quantify & Transfer Risk

It’s good to take stock of the risks that could disrupt your lifestyle and family’s well being. Your financial advisor can help identify risks that may impact your well being. He or she can quantify your financial exposure and recommend strategies to transfer that risk to an insurance company. To identify risks, your advisor should ask you about your income, mortgage, other debts, investments, net worth, and desires to leave money to heirs.


Below are examples of information advisors collect, the various risks identified, and the insurance available to transfer.

  1. Family Income – recommend a proper amount of disability insurance in case you or your adult children are unable to work.

  2. Income, mortgage, debts, and investments – recommend the right amount of life insurance to be sure your family can pay the bills and meet goals such as college if you suddenly pass away.

  3. Net worth and how your assets are titled – recommend sufficient umbrella liability insurance to protect your hard earned wealth in the event of a lawsuit from a car accident or other unfortunate event.

  4. Net worth – if above $12.92 million ($25.84 million, if married) you may owe estate taxes. Your advisor and attorney may recommend permanent insurance to cover taxes. Or, offer gifting or trust strategies to lower the value of your taxable estate.

  5. Net worth and income – evaluate whether to accept the financial risk for long term care expenses, or purchasing a policy which provides in-home care or assisted living to protect your nest egg.

  6. Your desires to leave money to children, a charity, other person or organization – forecast the future value of your investments to see whether you have enough to meet your goals. Or, if you need to supplement with life insurance.

Insurance premiums aren't a financial “loss.” They are an important investment designed to help protect you and your family as you build and grow your personal wealth.

Protect Your Family’s Lifestyle

Some insurance, such as homeowners or car insurance, may be required. When it isn't mandated – as in the case of life insurance, long term care, or disability – individuals may be tempted to avoid the certain financial “loss” associated with insurance premiums, assuming the risk of much larger losses that are less likely to happen.


But insurance premiums aren't a financial “loss.” They are an important investment designed to help protect you and your family as you build and grow your personal wealth.


Final thought

Do you need help identifying risks that might impact your family? Have you evaluated and quantified the risks to your financial well being? Are you certain your risks have been adequately transferred with insurance?


If you have more than $2 million saved and need help from a wealth manager, the Peak Wealth Planning team can assist.

Peak Wealth Planning specializes in helping high-net worth individuals and families plan for the future.


You may also be interested in reading more about how to protect your wealth:


You may also be interested in reading more about Insurance:



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About the Author

Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.


Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-based financial advisor based in Champaign, Illinois, and Fraser, Colorado.




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