After hearing from a fellow reporter who lost work to a brain aneurysm, I was happy to pay $25 a month for disability insurance to protect myself and my family
After attending a conference and hearing from a speaker who had to take a year off work after a brain aneurysm, I decided to get disability insurance for myself. The reporter had relied on it while she was recovering. It was easy to apply for coverage through Breeze, and I selected $1,500 of coverage for $25 a month. I added a rider that increases my benefit by 5% per year for the duration of the policy, which is five years. Policygenius can help you compare disability insurance policies to find the right coverage for you, at the right price »
As the current breadwinner in my house and an independent contractor, the thought of getting disability insurance has crossed my mind. Last year I attended a conference where the main theme is usually hustling, working hard, and really pushing yourself to be successful. I was surprised when the closing keynote came from a former news reporter who thought she was totally healthy until suffering from a brain aneurysm. She encouraged a lot of us attendees to slow down and take the time to get our financial affairs in order — including becoming properly insured. She had to take a year off from work to recover from the aneurysm, but mentioned how grateful she was to have had disability insurance. The insurance benefit helped replace a portion of her income while unable to work for 12 months. I know that no one's health or wellness is guaranteed regardless of age, so this past year I've been committed to exploring disability insurance options for myself. As it turns out, disability insurance is cheaper than I thought, and it's easy to obtain. A bit of background on disability insurance The word insurance often means extra money coming out of my pocket. But most times it's money well spent to protect an important asset in the event of the unexpected. Homeowners and renters insurance protect your house. Auto insurance protects your car. Life insurance protects your loved ones. And disability insurance protects your income in the event that you can't work for an extended period of time. According to the CDC, one in four American adults is living with a disability. Still, at least 51% of Americans are without disability coverage, which creates the stressful situation of figuring out how to make ends meet. If I were unable to pay bills and put food on the table, my initial reaction would be to look for work or pick up a side hustle. However, when you're disabled or unwell, it's not that easy since you may not even be allowed to work. Disability insurance, both long-term and short-term, protects your source of income if injury or illness limits your ability to work. Comparing disability insurance costs Getting quotes and comparing costs was most important for me because I am already paying for many different types of insurance. At first, I thought disability insurance would be expensive, but it's actually something I can fit into my budget without issue. I heard about Breeze, which is an insuretech company that allows you to get a free and quick quote for disability insurance, then apply completely online. A common rule of thumb is to expect to pay 1% to 3% of your gross annual income on disability insurance per year. This means if you make $50,000, you could be paying $500 to $1,500 per year. I like that Breeze gives you options based on how much income coverage you'd like. It took just two minutes to fill out the quote form to get these options.
While $1,500 per month of income protection would not cover all my bills, it would cover most of my mortgage, which is helpful. Since my husband works too, I'm not looking for full income replacement. However, I know that losing my income would still result in a major financial hardship. Breeze's quotes seem pretty reasonable, and they even allow you to choose which coverage term you'd prefer. To obtain $3,630 per month of disability insurance for five years, I'd pay around $47 per month. If I wanted to lock in this coverage until the age of 65, I could do so for around $74 per month.
There are other riders I could add, too, like the Automatic Benefit Increase rider. This means for an extra $1 per month (on average), my monthly benefit will increase by 5% each year. I chose to go with a five-year disability insurance coverage term for just $25 per month, and by the end of my term, my benefits will have increased by 20% thanks to this rider. Does disability insurance replace an emergency fund? Not in most cases. Remember, disability insurance only covers people with disabilities. Your emergency fund can be used to cover expenses due to any life change. I'm actually most interested in long-term disability insurance, which would provide a lot of financial relief if I ever did become disabled in any way. I wouldn't want my family to have to struggle, take out loans, or even lose our home if I couldn't work. My emergency fund can handle our short-term needs for a few months, but long-term disability insurance provides me with more peace of mind. Plus, at only $25 per month or $300 per year, it's not really breaking the bank. I can think of a lot of much less important things I spend $300 per year on, whether it's dining out, buying home decor, or purchasing clothes. Cutting out any of these things during the month or even just buying a few less cups of coffee at Starbucks each month can easily help me afford this much-needed expense. Related Product Module: Related Product DepositRelated Content Module: More Personal Finance CoverageJoin the conversation about this story »
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I'm a financial planner, and I almost always recommend the same type of life insurance to my clients
Summary List PlacementI can't tell you how many times clients have come to me and said...Summary List PlacementI can't tell you how many times clients have come to me and said some version of, "I know I need life insurance now that I bought a house and have kids, and this guy I went to college with is trying to sell me permanent life insurance — is that the right thing for me? It feels expensive." In most cases, my answer is simple: You do need life insurance, but you don't need permanent life insurance. Here's what I tell my clients. How life insurance works Life insurance is intended to provide a lump-sum cash payment after your death to your beneficiaries to help them with things like paying off debt, paying monthly expenses, and funding college for kiddos. You typically need it if someone depends on your income or your care. If you're working, your income between now and retirement is likely a huge part of your family's ability to reach their goals, and life insurance is meant to help replace some of your lost income should you die prematurely. If you're not working but you're a primary caretaker for your kids, replacing you would be costly, too, so life insurance can help your family take care of the million things that you do in any given day should you die. The difference between term and permanent insurance There are two main types of life insurance: term insurance and permanent insurance. (Spoiler alert, I almost always recommend term insurance.) Term life insurance lasts for a specific period of time, the term of the policy. It has a set premium for and a set death benefit that stay the same for the entire policy term. For example, if you're 35 and you get $1 million of 30-year term coverage, your premium, let's say $75 per month, would stay the same for 30 years. Term insurance has a much lower monthly premium than permanent coverage. Permanent life insurance is intended to be in place for your entire lifetime, and provides the opportunity to invest in a tax-advantaged cash value account. However, most people don't need life insurance for their entire life, because at some point they retire and have enough assets and income from Social Security to live comfortably. And, after all of the commissions and substantial fees associated with permanent coverage, investing in life insurance isn't a very efficient way to reach your investment goals. Oh, and permanent life insurance premiums are much higher than term premiums. Why I recommend term life insurance in most cases So which type of coverage is the right kind to choose? For the vast majority of my clients, term is the clear winner. My clients are looking to term insurance to provide a death benefit to pay off their mortgage, fund college, and cover expenses for their families until they reach retirement. Since most of my clients are in their 30s with young kids and plan to retire in their 60s, we typically use 30-year term coverage to last until they're ready to retire. Depending on the age of their kids, we'll split their coverage between two policies — a 20 year policy to last until their youngest child finishes college, and a 30-year policy to last until retirement. All of that said, there are some special cases where permanent coverage makes sense. If you are buying insurance to provide for a special-needs child who will need care no matter when you die, permanent life insurance can be a good option. Other times permanent coverage might make sense are when you're trying to maximize a pension payout, when you're funding a buy-sell agreement for a business, when you anticipate an estate tax issue (which means you're planning to die a multi-millionaire), or when you just really want to leave a specific amount to a certain beneficiary no matter what. Financial planners and financial advisers get very heated about the old "term vs. perm" life insurance debate. For those who sell insurance, permanent life insurance pays huge commissions compared to term coverage. And those who sell insurance are not always required to look out for your best interest when they're selling insurance to you. Yup, you heard me right. If you're working with an adviser who is trying to sell you insurance, ask them if they are bound to a fiduciary standard in the life insurance transaction, and inquire about how they get paid based on the various insurance policies they're pitching to you. If you don't get answers you like, RUN! Natalie Taylor, CFP, BFA, draws on 15 years of financial planning experience, seven years in fintech, and a decade of professional speaking to share advice that works in real life. Related Content Module: More Life Insurance CoverageJoin the conversation about this story »
Summary List PlacementLike many young parents, actress and model Brooke Shields realized she needed life insurance...Summary List PlacementLike many young parents, actress and model Brooke Shields realized she needed life insurance at a moment when a lot of changes were happening in her life. "The moment that I got pregnant was when I had [that moment],"she told Business Insider. "I was getting married, having children, and becoming responsible for someone else," and life insurance became critical. Life insurance can help anyone who depends on your income to support themselves if you die unexpectedly, and help cover everything from living expenses to mortgage debt. Suddenly, she realized that she'd be responsible for another person in ways she hadn't been before. Before her first baby was born, "the only other person I really had to take care of was my mother," said Shields, who is partnering with the nonprofit Life Happens to encourage Americans to get life insurance. With a baby on the way, getting life insurance was critical to make sure that her future family would be provided for, no matter what. Life insurance is important for all new parents, and it's easy to get covered For parents with children depending on their income, or a spouse who needs help paying the bills, life insurance can help ensure those loved ones are covered in the event of an unexpected death. Term life insurance policies are generally the most affordable type of life insurance. These policies cover people for a set number of years, generally between 15 and 30 years. Term policies are ideal for young parents, covering your family for enough time for kids to grow up, or pay off large debts like a mortgage or student loans. According to data gathered by Business Insider, the average term life insurance policy costs $44 per month. It's cheaper the younger you are when you get the policy — the average person in their 30s pays about $16 per month for term life insurance coverage, while people in their 40s pay about $22 per month. For Shields, buying a life insurance policy was a small price to pay to protect her new family. "People just want to live for today, but really, [life insurance] is just so affordable," she said. Related Content Module: More Life Insurance CoverageJoin the conversation about this story »
When you signed up for your employee benefits, you may have glossed over the section on...When you signed up for your employee benefits, you may have glossed over the section on disability insurance. If you’re healthy, it’s tough to imagine ever being unable to work—even for a short amount of time. But disabilities can happen, and your workplace coverage may not be enough. Read more...