Insurance and your life stage
Where you are on the life continuum has a definite bearing on your insurance needs. For example, if you’re a young married-with-kids couple
struggling to balance your income with outgo, college and retirement
may seem far in the future. But time passes quickly, so you want to
develop a strategy that includes insurance, savings and investments to
cover all the bases.
You also want to be sure the family will be provided for in the event
of a catastrophic illness or untimely death of either you or your
spouse. Even stay-at-home spouses should have coverage, since their
contribution to the operation of family household would need to be
covered in the event of their death.
Policies can be economical at this time in your life, since the younger
the insured, the lower the premium cost for the same benefit amount.
For those at life’s midpoint—kids are gone but
retirement is still a decade or more away—you are most likely now in
your peak earning years. Your goal is to make the most of this time to
increase your financial stability by saving aggressively for retirement,
while protecting yourself from unexpected setbacks, by evaluating the
extent of the life insurance coverage you have and whether the amount
would be sufficient to support your spouse in the event of your death.
Disability insurance and long-term care insurance
are two other options you should consider. Disability insurance
provides an income to you and your family if you are unable to work
because of illness or injury. According to a study conducted by LIFE,
half of working Americans couldn’t make it one month before financial
difficulties would set in, with nearly one in four unable to make it a
week. Also, keep in mind that Workers Compensation only pays for
work-related injuries, while the vast majority of long-term disabilities
are not job-related.
As for the cost of long-term care—an increasing concern for
middle-aged and older Americans—the average cost per year in a nursing
home is more than $80,000, with home care costing $20,000 to $30,000
annually for just five hours of care each day. Add in the expense of
skilled caregivers such as therapists, and you could see your retirement
and savings wiped out before you know it. Your insurance professional
or financial advisor can help you assess if long-term care insurance is
appropriate for your income bracket.
Is retirement just around the corner? Or perhaps you
have already closed that chapter of your life and are preparing for a
new one. With this stage potentially lasting several decades, you want
to make certain that you have enough to keep your “golden years” from
tarnishing. A lifetime annuity can function as a do-it-yourself pension
plan, providing regular payments in exchange for an investment of a lump
sum of money.
For those 65 or older, while Medicare is now your primary insurer,
there may be still expenses that are not covered, such as coinsurance
for skilled nursing care and hospice stays or emergency overseas medical
care. Consider purchasing a Medicare supplemental, or Medigap policy,
to supplement your Medicare coverage.
What else to consider
While your life stage definitely has a bearing on the type and extent
of insurance coverage you have, there are other factors that can have
an impact. Here are some additional questions to ask yourself as you
evaluate your current policies and your future needs.
- Do I have more—or fewer—dependents who would be financially affected by my inability to work or by my death?
- Do I need to update the beneficiaries on my policies?
- Are there riders or options I should add to my life policies, such as an accelerated death benefit or conversion option?
- Do I need to increase my coverage amount to ensure my family’s current style of living is protected?
- If I’m a small-business owner, do I have the following in place: a disability insurance policy, buy-sell agreement and key person insurance?
For help making the right choices when it comes to insurance
vehicles, schedule a policy insurance review with your insurance agent
or a financial professional.
Finally, make two copies of your insurance policies, storing one at
home in a fireproof safe or file box and the other off-premises such as
in a bank safety deposit box. Create a master list of your policies
(policy number, benefit amount, insurance company and agent contact
information) and provide this to a key family member and/or your
executor along with their location.
Now is the best time to get your insurance “house” in order!
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