When a financial contributor to a household either dies or becomes impaired, the family loses some or all of their income.
The “Safety Net” Has Holes
Most employers provide a baseline of income protection. Life insurance benefits are typically equivalent to one or two years of salary. Income protection for disability is frequently capped at a low monthly benefit, say $5,000 to $10,000. Social security also provides some benefit, but is is fairly modest at $3,000 per month for high-income professionals. Bottom Line: The safety net isn’t enough.
You’re On Your Own
People plug the holes in the safety net with insurance of their own. For life insurance, $1 million of insurance will provide approximately $40,000 of annual income that your spouse won’t outlive. One million dollars is a lot of money, but it doesn’t provide a lot of income.
Long term disability insurance provides up to 60% of your monthly income should you have a health issue that diminishes your earning power. You don’t have to be completely disabled to receive the income benefit. In fact, most people aren’t. They are simply impaired in a way that impacts their income. Examples include cancer treatments, heart attack, depression, as well as other chronic diseases.
What does it cost?
The good news is these solutions have never been more affordable than they are today. For most of our clients, less than 5% of their paycheck will thoroughly protect the lifestyle they need and want should something unforeseen happen.