If you’re like most people you probably consider either your home or income-producing investments as your greatest assets. However, I’m going to ask you to reconsider that typical answer.
If you are employed or actively working, I would argue that your ability to earn an income is your most valuable asset. If your income were to come to an end, what would happen? Many people would be unable to pay their bills, care for their families or save for their retirement.
Are you aware that the risk of becoming disabled is much greater than the risk of premature death? Cancer continues to be a leading cause of long-term disability claims, but interestingly normal pregnancies are the leading cause of short-term disabilities. I don’t consider a planned absence due to a normal pregnancy as a “disability” but many disability policies do.
Notwithstanding individual circumstances, I typically recommend having a multi-faceted approach to disability planning which includes building a cash account and having a home equity line of credit as both can cover monthly expenses for shorter disabilities (or an unexpected job loss). Disability insurance is the best way to cover the longer and/or life-long disabilities.
I have also incorporated what is called “critical illness insurance” into my own disability planning. Critical illness insurance will pay out a tax-free lump sum of money if the insured is diagnosed with certain illnesses including cancer.
The effects of a disability can be as devastating on the spouse (and kids) as it is on the one suffering from the illness or injury. This is especially true when financial concerns are added into the mix. If you haven’t reviewed your disability planning recently – do it both for you AND your family.