February 2013 - Susman
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Do I have enough money in savings to live off?

The short answer to the title’s question is: probably not. If you’re an average Jane or Joe American, then you only have about $3,800 in your savings account. That’s about enough to last you about a month, maybe–if you’re just sticking with basics, you know, things like shelter, food, water, electricity and a car.

But what happens when you suddenly become disabled and aren’t able to work for six months or a year? What will you do when the money in your savings account does run dry? Ask good old Uncle Sam? Sure, you can try. But he can only help to an extent, and these days that extent is quite small. If you’ve got a partner who is bringing in an income, that’s great, but how much of their income goes to your household’s regular spending? Again, for the average person, most of it is "spoken for" the moment the direct deposit enters hits the bank account.

One of the best investments that you can make–even today–is to buy a disability insurance policy. If you become disabled, it will give you a percentage of your previous salary so that you can continue to live as you are today. Some companies provide these policies for employees, but most don’t, so if you’re not hurt on the job–thereby being covered by workers comp–you’re out of luck when it comes finding a way to put food on the table. Disability policies aren’t cost prohibitive , and are worth the sacrifice of cutting a few cable channels in order to buy a policy for yourself and, if you have one, your partner.

Is life insurance a waste of money?

Let us tell you a story about a woman we’ll call Hilda. Hilda was a devoted wife to her husband of forty years, helping to raise the kids, cooking for him every single day of their marriage, preparing him a lunch for work and cleaning the home. Their marriage was like a fairy tale, having met while John was in the Air Force and Hilda had treated him as a nurse after a training routine went awry.

Retiring young, John and Hilda spent twenty years traveling and adventuring together, never thinking of anyone but one another.

Today, Hilda is married to John’s sleazy car salesman brother who always mae more money than John and loved to throw it in his face. She never showed much interest in him when John was around, but since he passed away a few years ago, John’s brother took the opportunity of a lifetime to propose to Hilda, who agreed only because John never bothered to take out a life insurance policy.

You might not have a sleazy brother who runs a car dealership, you might not even be married, but chances are that there’s someone who relies on you who would have to make some tough decisions if you weren’t around. Life insurance isn’t just a security blanket, it’s not just there to make you feel better, it’s a real life safety net that catches your loved ones should something happen to you.

So is life insurance a waste of money? No. Next question.

Why do I need Disability Insurance?

No one really wants to get disabled because of an accident or illness. That doesn’t mean though that it can’t happen to you. Much as we would like to pretend otherwise, accidents and illnesses do not always happen only to others. Even if you are an extraordinarily careful person you still are not immune from falling down the stairs, cracking your head on an icy sidewalk, getting hit by a drunken driver or becoming afflicted with some debilitating disease.

Let’s face it. Illnesses and accidents can happen anytime and to anybody. If you are really lucky, you will walk away from the experience with little more than a few painful memories. Sometimes however, a disease or injury can knock you out of work for days, weeks, months or even permanently. Unless you happen to have a super large bank account, a rich relative or the most caring employer in the world, a disability resulting from a non-workplace injury can hurt you financially in a really bad way. A single year of total disability can wipe out multiple years worth of painstaking savings. It’s one of the reasons why getting disability insurance is such a good idea.

Disability insurance pays your salary, or a portion of it, when you are too sick or too hurt to work. It can contribute towards your bills, help you make the payments on your home and car, pay for your groceries, take care of your children’s education and even help you sock away a few dollars for your retirement. Employers used to pay for these policies until even relatively recently, but a growing number are refusing to do so any longer. That means it really is up to you to figure out and purchase what you need by way of short-term and long-term disability coverage. The few dollars that you spend on the policy each month will be more than worth it if you ever are unfortunate enough to become disabled. It can happen. Even if you fervently wish it never does.

Why do I need life insurance?

Death is one of two certainties in life, but it is one a lot of people don’t like to think about. (Not that they are especially fond of the other, either). But even though we can’t deny that we’re all going to die sometime, we can control how difficult the situation will be for those we leave behind by investing in life insurance.

For most people, getting life insurance is a good idea. Dying is not cheap. There may be medical or other unpaid bills. There might be children and or a spouse that relies on your income for daily living. The funeral, including burial or other disposal of your remains is going to cost money. Oh, and there’s that other certainty — death and inheritance taxes that you more than likely don’t want your loved ones to have to dig into their own pockets to pay.

So the question really isn’t "should you buy life insurance?" it’s what kind and how much should you get. This is a question where the answer can vary a bit more. There is whole or universal life insurance that carries a higher premium but also carries a cash value that you can borrow against if you really need to, and that will keep going until the end — no matter how long it takes.

There’s also various levels of term life insurance that how smaller premiums and keep you covered for a specified time period, such as 20 years. Young to middle aged persons with families often choose term plans that will cover the years that their children are in school so that if anything were to happen, they would be able to pull through financially until they are able to make up the income loss with their own earnings.

When you make the decision of what type of insurance to buy, it should be based on your situation, and the likely circumstances of those you leave behind, and should not be simply a matter of money. Take the time to really consider what you need and discuss it with an agent that can point you in the right direction.