Protection & Security products are the cornerstone of a solid financial plan. These products will protect you against common risks that we all need to plan for and think about.
You could lose your job
Being disabled or sick
Not enough time
Too soon?
The base of your financial planning pyramid is, in its simplest form: emergency savings and insurance. These are some considerations as you create the foundation for your financial plan.
You should save for emergencies – Financial professionals will tell your that you should always have enough money to cover your daily living expenses for three to six months.
You could use this money to pay for your bills before you have your disability insurance kick in. When deciding how much to save, consider your family and personal situation.
Your emergency savings should be saved in checking, savings and money market accounts. This will allow you to access your money without penalty.
Insurance – Insurance is the foundation of your financial plan. What would you do if your house is severely damaged? What would you do if your job was cut short? What if you were to die? What if you were to die? Would the money still be available to pay for the family’s daily living expenses, keep the house occupied, and help fund college savings and retirement plans for your survivors.
Insurance is a financial safety net that will ensure your family’s financial stability in the event of an unexpected. These are the most important types of insurance that you should consider for your financial foundation:
Life insurance – This insurance protects your loved ones and family against financial hardship in the event you are diagnosed with a terminal illness. Life insurance is necessary if you depend on someone in your life. An insurance professional can help you determine how much and what type of insurance you need.
Although many employers offer life insurance coverage to their employees, it is often not sufficient to provide financial security for your family members. You can’t usually take your coverage with you if you quit your job or change jobs.
See the Life and Health Insurance Foundation for Education for more information on life insurance.
Disability insurance – This insurance replaces income lost due to illness or disability. The coverage provided by short-term policies is typically for 13 weeks to one calendar year. Long-term policies can provide benefits up until 65 years of age or for the rest of your life.
Remember that not all policies provide benefits for those who are disabled. Others pay only for those who are unable or unable to work in any kind of gainful employment.
Although many employers offer some type of disability coverage, it may not be enough to cover your family in the event that you are disabled or injured. You should consider purchasing an individual policy.
See the Life and Health Insurance Foundation for Education for more information on disability insurance.
Insurance that covers medical costs – This helps to cover the rising cost of health care. It is important to weigh the pros and cons of choosing the right type of insurance coverage for you.
HMOs, which are the most expensive option, usually require that members only access care from within a plan’s network.
Indemnity plans are at the other end of the spectrum. These allow you to choose from a wide range of providers, but they are often the most expensive.
Point-of Service plans are a type of HMO, but members can also pay more to see outside-of-network providers. Preferred Provider Organizations, or PPOs, function similarly to indemnity plans but offer better reimbursement rates when care needs are covered in-network.
See the Life and Health Insurance Foundation for Education for more information on health insurance.
Long-Term Care Insurance: This insurance covers all aspects of your care if you are disabled or have a chronic illness.
Most people associate long-term care with nursing home care. Most policies cover care at home, in assisted-living facilities, or in adult day care centers.
It’s important to remember that there is a 50/50 chance that someone will require long-term care at one point in their lives.
Two exceptions apply. Medicaid typically covers care for those with assets less than $2,000 If you only have a small amount of assets, long-term insurance may not be able to cover your needs. Long-term care insurance is not recommended if you have large assets and can pay for the care without affecting your net worth.
When purchasing long-term insurance, there are many factors you should consider. The Association of Health Insurance Advisors (AHIA) provides more information on these and other important considerations for long-term care insurance.