Don't Forget to Protect Your Income
One of the obvious solutions is insurance. Insurance helps reduce the financial impact of an economic loss. For example, if your car is damaged in a car accident, you suffer an economic loss, and auto insurance helps cover the financial impact. Likewise, if your home burns in a fire, you suffer an economic loss, and your coverage pays for the cost to rebuild, easing the financial impact.
Homes and automobiles are considered our most valuable assets, so it's easy to understand the need to insure them. But, hold on a minute. Let's rethink this. How did you acquire your home or car? You probably allocated a portion of your monthly income to cover the payment for your house or auto loan. You were probably approved for your mortgage or auto loan based on your income. Without income, what do you have? No home. No automobile.
Your ability to earn an income is by far your most valuable asset. Yet this most valuable asset is often underinsured or worse yet, not insured at all.
You may have already planned for the unexpected by purchasing a life insurance policy. Life insurance helps ease financial stress for your loved ones if you are not here to provide for them. A life insurance policy may make it possible for the family to pay the mortgage and stay in their home. A life insurance policy can also mean the difference between children attending college or giving up the dream of a college education.
When a breadwinner is unable to work and earn an income, families experience very similar financial stress, and the very same assets are placed at risk. If you are unable to work, your family may struggle to afford basic living expenses. And, your family's expenses may be even higher than usual due to your cost of care and rehabilitation.
Don't think this risk applies to you? Think again.
According to the Social Security Administration, just over 1 in 4 of today's 20-year-olds will become disabled before retirement.1 An event with odds of roughly 25 percent is an event worth planning for. In many cases disability is caused by illness such as cancer, stroke or heart disease.
A disability insurance benefit helps fill the financial gap when your income is interrupted if you become temporarily disabled. Just as you buy life insurance to secure your family's financial future in case of your untimely passing, you buy disability insurance to secure your family's financial future if you're unable to earn a living. This is an important component of all sound financial plans. Think of it as income protection insurance or paycheck protection insurance.
Your financial advisor can show you options to fit your budget. Remember, even a small amount of disability insurance is better than having none at all. Now that you know how common an income interrupting disability can be, take the next step. Protect your earning power.