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It's not enough just to build wealth, you have to protect it! You may not perceive yourself as having wealth, but if you have money in your checking account, a savings account, retirement account at work, car, house or all of the above - you have wealth! Let's talk about various types of insurance you should be considering to keep yourself protected.
1. TERM LIFE INSURANCE
- If you have anyone who depends on you financially, you NEED life insurance. This can be a spouse, child, etc. Term life insurance (as opposed to whole life, universal life, etc) is inexpensive. We all feel nothing will ever happen to us, but the unfortunate reality is that it's possible. It would be bad enough for your family to lose you prematurely. Don't add insult to injury by leaving them in financial disarray. You should have at least 10 times your annual income in a term policy. Make sure the policy length is at least long enough to ensure you would no longer have dependent children.
I avoid whole life insurance policies. Although they have a niche role in a few financial plans, for the average person they are laden with unnecessary fees and restrictions on accessing your money. Remember, the person selling you this likely makes a nice commission on the product. Seek a second opinion before moving forward.
2. LONG TERM DISABILITY
- Statistically, it is far more likely that you would need to utilize long term disability insurance than life insurance. A sudden inability to work could leave you financially destitute with no warning. Make sure you have a long term disability policy that ideally provides at least 60% of your current pay. If your workplace doesn't offer a policy, seek one out from an insurance broker.
Long term disability in general is a starting point, but if you have advanced training or skills (as most healthcare professionals do) you should consider an "own occupation" long term disability policy. This will protect you if you're unable to do your current job, where a traditional long term disability policy will only protect you if you can't work at all. These policies are a bit more expensive, but in my opinion are very worthwhile to protect the large income you've worked so hard to earn.
There are a lot of nuances to these policies that are beyond the scope of this post. I highly recommend using Dr Disability Quotes to help you secure yours. It is who I personally used to help me establish a policy, and I was extremely pleased with their level of in depth knowledge and outstanding customer service.
3. ?SHORT TERM DISABILITY
- If you can cover your expenses for 90 days (the duration of short term disability) because you have a fully funded emergency fund AND your employer doesn't pay 100% of the insurance policy premiums, you could consider skipping this one. If you have a planned maternity/paternity leave, you may consider purchasing one to cover the expected leave. Remember, if you pay for the policy premiums out of pocket the disability payments are not subject to income tax. If your employer pays for them, they likely will be subject to taxation.
4. IDENTITY THEFT INSURANCE
- I hate that this is even a thing, but the reality is that identity theft is a MASSIVE problem worldwide. There are lot of things you can do to reduce the likelihood of your credit being stolen. For one, we keep our credit frozen at all times unless we are opening a new account. Despite precautions, theft is always still possible - and has the potential to be both massively expensive and stressful. Our policy covers monetary losses, and has an agent that will do the majority of the paperwork required if needed.
5. HOME & AUTO COVERAGE
- This one is fairly obvious!! Make sure you have sufficient coverage here. This is not an area to skimp.
6. UMBRELLA POLICY
- If you have substantial assets, consider a personal umbrella policy. They are surprisingly inexpensive. Most require you to meet certain minimums on your home and auto policies before you can be considered. The smallest policy you can typically get is $1M, so the classic recommendation is to move forward with this type of policy once you have $1,000,000 in assets.
This type of policy only adds additional coverage to the policies you already hold. It does not cover new things. For example, if your current policies don't protect you in the event of a flood, your umbrella policy won't either.
There are entire books written about asset protection. This is a mere scratch on the surface of this topic, but a few basic insurance policies can go a long way towards getting you started.
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