Layers of Protection
Protection. We’re obsessed with it these days. We switch passwords, slather on sunscreen, install detectors and alarms, and wear our lucky socks on every flight. That’s all good. But are you taking meaningful steps to protect yourself financially as well? Safeguarding your most important possessions—life, health, ability to earn money, and the assets you’ve accumulated—is a big step toward increasing your financial and emotional confidence. Think of it like when you were younger and your parents would insist on you layering up; “You can always take layers off but you can’t put on what you don’t have with you”. By all means, change your online banking password every 90 days (you do that, right?) but also consider adding these five defensive layers to protect what matters most to you.
Layer 1: Health Insurance*
Healthcare is expensive, and we often need it when we least expect it. This can mean a mountain of medical bills. In fact, the inability to pay medical bills is the number one cause of personal bankruptcies.1 No matter what the current or future state of healthcare holds, if your employer provides a health insurance option, sign up. Even if the cost of premiums makes you cringe, it’s better than incurring a crushing load of medical debt. If you’re self-employed, look for the best coverage you can afford. Also, consider a Health Savings Account (HSA). It’s a tax-advantaged way to save for medical emergencies. Even if you don’t use it today, it travels with you and can be used well into retirement.
Layer 2: Life Insurance
In the event of your death, the proceeds will help your loved ones maintain their lifestyle, avoid financial hardship or bankruptcy, and pay essential bills such as rent, mortgage, health insurance, college tuition and loans. In addition, certain types of life insurance allow you to build cash value, which can be used during your life to fund things like mortgage payments, education, and loans.
Layer 3: Disability Insurance
If an accident or illness prevented you from working for an extended period, your financial well-being could take a serious hit. Disability insurance fills that gap by replacing a percentage of your lost income. It’s typically tax-free and you can even use the money to cover retirement contributions and student loan payments. And don’t fall for the myth that disability insurance is only for rare, catastrophic accidents. Many people rely on these policies to cover the income lost due to relatively common conditions such as heart disease and arthritis.
Layer 4: Long Term Care Insurance*
Seven out of 10 Americans age 65 or older will need long term care (LTC) at some point.2 And it can be expensive: In 2016, the national average for nursing home care for a shared room was $225 per day.3 Yet, only one-third of Americans age 40 or older have set aside money for this eventuality.4 LTC insurance is one way to help reduce the cost burden. Caring for an aging, sick relative can wipe out a family financially. It’s critical to investigate this type of protection before you or a loved one needs it.
Layer 5: Umbrella Insurance*
What do a trampoline, a swimming pool, and a dog have in common? If you have one (or more), they heighten your personal liability. An umbrella insurance policy is very easy to set up and provides an extra layer of protection for your assets. It kicks in when you reach the limit on liability coverage for your homeowners, auto, and other insurance. So if someone falls off your trampoline into your swimming pool and is bitten by your dog just after being resuscitated, an umbrella policy will help protect you in multiple ways..
While some of the topics above may seem “next level,” they are simply complementary to all the fundamental steps you’ve already put in place like cutting expenses, budgeting, and defining goals. Establishing the right protective measures, layering up if you will, reinforces all the hard work you’ve already done and allows you to prepare for the unexpected. Don’t you feel a little bit better already?
* Neither Guardian nor its subsidiaries issue Health, Long Term Care, or Umbrella Insurance.
** Guardian’s Living Confidently survey, 2017.
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