Why Insurance the Foundation of Financial Planning

Why Insurance the Foundation of Financial Planning

By Tim Chuang, Principal Advisor, Radiant Group


As you ask people’s experience about Financial Planning. One of the most common perception is, Financial Planning is about “Investment”, buying Funds, growing assets for retirement. But investment is only one component of financial planning, a tip of the iceberg. Here is why.


In building a financial security plan, most experts agree that there are priorities:

First, it’s critical for you and your family to have a plan to minimize loss in case some of life’s uncontrollable events should occur, such as premature death, a critical illness or a major disability. These events can have a profound impact on your family’s financial security.

Secondly, it’s important that the controllable events are well taken care of. These include retirement and savings goals. Once these two areas are established and your financial security base is in place, we can look for growth opportunities within your portfolio.


From time to time I would come across clients would say to me with some fancy words, like “Self-insured”. Meaning their strategies would be to put the money in the investment (such as stocks, mutual funds, bitcoin, real estate), focus on maximizing the growth. So they don’t need any insurance.


Though if we use a financial calculator to punch the numbers, investment projection will look amazing in the long term. I don’t disagree with the concept of investing long-term. As the matter of fact, focusing on long-term investment is highly recommended. But we need to make sure the uncontrollable risks had been mitigated and addressed first. Think about it, if there is a serious car accident, a major disease or disability, we will lose income for a very very long time, sometimes, even for life. Then all the planning centered around investing on “growth”, would not even happen.


It is easier to buy a 1M Life insurance and knowing the money would be there you need it now, than have to save and grow to 1M for your family. It is way cheaper to buy a 250K Critical Illness Insurance or Disability Insurance would pay 5K/ month until the insured turns age 65, than have to save and grow enough money ready in the bank account to deal with the unfortunate sickness or disability.


Even for people who have the skills to invest, overcome market risks again and again, and grow your money to be enough for self-insured. I would argue it is still better to incorporate insurance in financial planning. Because if one day the unthinkable happened, it would deplete many years of saving. But if there is insurance, the insurance payout would come in and pay for the financial impact; and the saving is still intact. Insurance protects the saving and provides a guarantee and certainty for the financial plan.


Radiant Life Insurance is the premium insurance agency in Greater Toronto Area, located in Markham Ontario. If you have any question, please contact us at info@radiantlifeinsurance.ca or visit our website at https://radiantlifeinsurance.ca/work-with-us/ book an appointment for a consultation.

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