When you think about the valued assets you need to protect, your short list might include your home, car or other expensive possessions. But what about the income behind them all?
Is Your Future Protected?
Your most valuable asset is your ability to earn an income. It provides for your day-to-day expenses, funds your long-term goals and often packs a larger financial punch than other assets combined. Property and casualty insurance can minimize costs from property or vehicle damage, but what if you lost your job and couldn't find work for a period of time?
Follow these steps to help ensure your ability to cover expenses and secure your financial future:
- 1. Set Aside an Emergency Fund-Be prepared for circumstances out of your control by setting aside an emergency fund with enough to cover at least six months of living expenses.
- 2. Control Expenses-Controlling expenses helps you save more for a rainy day and can lessen the burden you may feel from a loss of income. With fewer expenses, your emergency funds will last longer and you’ll have more flexibility to make good employment and financial decisions.
- 3. Protect Your Income with Disability Insurance-If you became disabled, even with health care costs paid by insurance, you would still need funds for daily living and additional expenses that can accompany medical care. Disability income insurance is essential to replacing the income to cover these critical expenses even for a short term.
- 4. Consider Various Scenarios and Needs-The typical employer-funded disability insurance benefit pays 60 percent of your annual income and is taxable. Consider what you need to live on and what your financial picture might look like if any breadwinner in your household became unable to work. Your financial representative can help you determine if it makes sense to supplement employer coverage with an individual disability policy to meet your needs. If you’re a business owner responsible for others’ incomes, talk to your financial representative about options for overhead expense and key person disability coverage as well as group policies for employees.
- 5. Decrease Your Risk of Disability-Making wise choices and taking care of your health can reduce your chances of disability. According to the Council of Disability Awareness, a 35-year-old man who is 5'10" tall and weighs 170 pounds has a 21 percent chance of becoming disabled for three months or longer during his working career. That risk would increase to 45 percent if he weighed 210 pounds and used tobacco. You can decrease your chances of disability by following healthy diet, exercise and sleep habits; limiting alcohol consumption; maintaining a healthy stress level; and treating any chronic health problems effectively.
- 6. Pursue Advancement Opportunities-Insurance isn’t the only wise move you can make to protect your income. You also can increase your long-term career potential through personal growth and development. Pursue advancement opportunities in your current job, keep your skills current and network in your industry to stay marketable and be ready for opportunities that may arise. You also can increase your own security by choosing a strong employer with a positive long-term financial outlook.
Your ability to earn an income is the foundation of your financial plan. That’s why it’s important to understand its value and do what you can to protect it and your future. A financial representative can provide illustrations that show how a disability could impact your future plans and what you can do to ensure your retirement nest egg will be there for your future needs.