We are all leading busy lives, and it’s all to easy to “miss the woods for the trees”. What if we prioritized by taking a step back and simply asked ourselves – what is our most important asset? Are we adequately protecting that asset?
Unless you’ve got a trust fund or are close to retirement, you’re likely going to have to rely on yourself to work for a while. What if you couldn’t? You need disability insurance.
The first place a lot of people go for disability insurance is work. There is either short-term and long-term insurance, and it’s important to know both what triggers a insurance payout and how much money you’ll get. Sometimes, as long as you can sit and do some form of work, you’re not considered disabled. If you want to get a form of disability insurance that kicks when you can’t do your specific job anymore, then I usually see a recommendation to see an independent insurance broker that works with several different insurers. Social Security will kick in as a last resort, but it’s also hard to qualify and definitely won’t replace all your income.
If you’ve got children or are already disabled yourself, you might depend most on your spouse for income. If that person is your most important asset, then you need both disability and life insurance. Term life insurance is cheaper because it is straight insurance without any investment component to muddle things up. Start with Term4Sale for some quotes and leads to local agents. Don’t forget about life insurance for yourself, as you might be the most important asset to your spouse as well.
Your Home Equity
Even after the credit crisis, a lot of people have a great chunk of their net worth tied up in their house. Do you have adequate homeowner’s insurance? It’s important to check on how much coverage you have, and what it covers. Do you have actual replacement cost coverage, or just an estimate? Are you covered in case of hurricane, flood, or earthquake?
Your Pension / Investments
Perhaps you are nearly or already living off your accumulated assets. Good job! If you have a pension, be aware of the financial stability of your former employer. Understand what the Pension Benefit Guaranty Corporation will pay out in the worst case. Some people decide to take a lump sum in case of future bankruptcy. In general, make sure your investment mix is aligned with your need and tolerance for risk. Consider this rough rule of thumb.
Avoid a Madoff situation. Is someone else in charge of your investments? Do a basic check at FINRA. Whoever manages your portfolio should use an independent financial institution, known as a custodian, to hold your assets. They should also be audited by a licensed, independent, and preferably well-known firm.
As for me, I’ll be looking at some individual disability plans in the near future.