Disability income, personal umbrella policies deserve consideration
POSTAGE by Rob Stamp
We carry car insurance partly because it’s the law. We carry homeowners insurance partly because the bank requires it. Some of us carry life insurance because it’s how we hope to prevent loved ones from being ruined financially when you’re taken from this world. We know the importance of covering our
asses assets. For many, though, nobody puts much thought into protecting something every bit as important. You have just as great a need to protect your future earnings.
If you were to survey relatives, friends, co-workers or other acquaintances and, if you insisted upon truthfulness and honesty, I’d bet people would rank their paychecks pretty high on their list of prized possessions. We all know people living paycheck to paycheck. We encounter folks all the time spending more money than they are earning. And, face it: Fallout from the poor economy has made it pretty darn hard for many people to save anywhere near as much money as they want to. It’s not hard to imagine how devastating a catastrophic event or illness could be on the family’s finances. Cut off the income and it’s gonna hurt. I don’t care who you are.
Can you really rely on Social Security benefits to allow you to maintain the standard of living you now have if something bad happened? Didn’t think so. Can you count on an injury occurring only on the job, where you’re taken care of by work comp? Most accidents and injuries don’t take place at work. And, even though you have liability insurance on your cars and home, can you really be certain the limits you carry are going to be enough to cover someone’s injuries you’re held responsible for? If it’s your fault someone is going to spend the rest of their life in a wheelchair, you could end up in a world of hurt yourself even with good coverage. That’s because there aren’t a lot of auto or home insurance policies out there that will cover all the costs associated with that kind of terrifying result.
That scenario is best addressed with personal umbrella coverage that provides an additional layer of liability protection beyond what is provided by the auto or homeowners policies. The most common umbrella policy provides a $1 million limit. It may become vital just to have the umbrella to keep from having wages garnished following a judgment handed down in a court decision that did anything but go your way. You could be forced to sell all of your assets. Though some folks are quick to use bankruptcy as a fallback option, that may not keep the court from having future earnings tied to the settlement of the unfortunate incident that led to this whole mess to begin with.
Here are three considerations for ways to help protect your future earnings:
- DISABILITY INCOME – You get hurt, get sick or become diagnosed with a medical condition that prevents you from working, you may wish you had disability income coverage that provides a source of income to help make up for what you used to make when you had a job. The amount of benefit, the length of time you need the benefit and the waiting period before benefits start getting paid all figure into the cost for the coverage.
- PERSONAL UMBRELLA – We’ve already discussed reasons this can be important. Rising medical costs and sympathetic jury verdicts mean that those liability limits you thought were more than adequate may not be so high after all. Don’t let ’em max out your policy limits, then force you to liquidate everything. “C’mon down, folks! We got balloons for the kiddos. Everything must go!” Cover it as best you can on the front end and, hopefully, sleep more sound every night.
- SUPPLEMENTAL INCOME – Don’t dismiss AFLAC, or similar supplemental plans, just because you can’t get Gilbert Gottfried’s annoying voice out of your head (no matter how long ago they recast the duck). Bill collectors aren’t going to care why you couldn’t work. There is a place for these types of plans to help you meet certain financial obligations you couldn’t otherwise if you were not collecting a regular paycheck.
We don’t want Johnny Law breathing down our neck for not carrying car insurance and we sure don’t want the mean old mortgage banker sticking it to us for some outrageously-priced, force-placed insurance policy that doesn’t do a damned thing for us but cost us more money. Maintaining insurance is a way to avoid those troubles. You can protect your greatest asset, yourself, with life insurance that will help pay for the things you’re no longer there to provide for. Perhaps now is a good time to consider what else could go wrong and do what you can to ensure a revenue stream that helps pay the family’s bills when you can’t.