Long-term care insurance ?

Disability insurance

Did you know that you're more likely to become disabled for a period than to die? Your most significant asset is your ability to earn money, so you need to ask yourself some questions: If I become disabled, how would I cover my living expenses? How will I be able to save for retirement? And because an overwhelming majority of disabilities are health related, can I afford the risk of being without a paycheck and possibly having increased healthcare expenses?

Protecting your income by purchasing disability insurance is a fundamental risk management strategy for all wage earners whose income is required to maintain their lifestyles. The two primary types of disability insurance include

• Short- term: Coverage will provide income replacement protection, usually after one week of disability, and will pay for up to six months.
• Long-term: This type of disability insurance kicks in generally at the six-month mark and continues until age 65.

If you have disability insurance through your employer, you probably have only long-term disability coverage, and typically the coverage ranges between 60% and 70% of your current gross salary. So, if you’re struggling to get ahead on 100% of your salary, how do you think your finances will work on 60% to 70% of what you’re currently making?

Life insurance

Under most circumstances, you need life insurance to protect your surviving family, who depend on your income. The overwhelming majority of Americans are drastically underinsured in the event of premature death.

Buying life insurance for a stay-at-home parent is useful, too. Although it doesn’t protect the family from their loss of income, it can help offset the additional costs that it would take to replace that stay-at-home parent’s services. For example, replacing the services of a stay-at-home mom caring for a 3-year-old and a newborn would cost $30,000 per year or more to hire a full-time nanny until the kids are in school. In addition, the children would need after-school care for several more years, and you might need a number of other domestic services, too. All these expenses add up to $250,000 or more of life insurance needed on the stay-at-home parent.

Fortunately, term life insurance is quite affordable, presuming that you’re fairly healthy. The cost of a high-quality, 20-year level term life insurance policy on a young mother may cost $300 to $400 per year — a level premium for 20 years!

Long-term care insurance

Medicare or your health insurance policy will not pay for long-term care expenses. These expenses are covered in one of three ways: self pay, long-term care insurance, or Medicaid — and you have to be nearly broke to qualify for Medicaid.

Consider purchasing long-term care insurance the day before you’re going to need it. Unfortunately, you can’t know what day that will be, so purchasing long-term care insurance between ages 50 and 65 is a good idea. The price of the insurance goes up as you get older, and the likelihood of needing long-term care insurance increases. Coverage isn’t available for anyone over 80 years of age. Weigh your risks wisely: Don’t be pennywise and pound foolish.