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What kind of insurance should you have at different stages of your life? When asked, financial advisors point to disability and life insurance as the most important types of coverage at any stage, as they apply throughout our lives.
In addition, counselors discuss often overlooked considerations for various points in your adult life. Here’s a look at some age-specific insurance advice, from your days at university to your golden years in retirement.
“If you take out a private student loan … and that loan is co-signed by a parent and not discharged after your death, you need some life insurance to cover the loan,” said certified financial planner David J. Haas, owner. of Cereus Financial in Franklin Lakes, New Jersey.
He said that term life is suitable only for the life of the loan as the need is temporary.
In the sequence of low
“If you’re working, you almost certainly need disability insurance,” says Sean M. said Pearson, CFP, associate vice president of Ameriprise Financial in Conshocken, Pennsylvania. “Many large employers offer it as a benefit, but that doesn’t mean you have enough.”
A note about life insurance: The two main categories are generally called “term” (insurance for a fixed period) and “permanent” (insurance for an indefinite period of time; i.e. lifetime).
Understanding your coverage is important, he said. Plans may cover total disability, which is defined as a condition in which a worker is unable to work, or they may cover only conditions in which a worker cannot complete part of the work or requires reduced hours.
“For example, if you were making $100,000 per year before your injury or illness, and after your health changes you can still complete a job that pays $40,000 but are unable to continue in your current role, you may not be able to collect insurance. ,” Pearson said.
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Getting married and starting a family means things are getting more complicated, says Robert Fragasso, CFP, CEO of Fragasso Financial Advisors in Pittsburgh.
“If you have a mortgage and need two incomes and want to start saving for college, term life insurance would be ideal until those loans are paid off,” he said. “For liabilities that occur after you pass, such as death taxes, a business purchase, or support for a disabled child, you should look into permanent insurance.”
Long-term disability insurance is often overlooked at this stage, said Ceres Financial’s Haas.
“The younger you are, the more important it is, because it covers lifetime earnings that would be in jeopardy if you become disabled,” he said.
If you take a leave of absence to care for a child or family member, be sure to “port” your disability coverage, or take it with you, Pearson said. “If a stay-at-home parent wants to return to work but has had a change in health during their time as a caregiver, that person may not be able to return to work quickly or at the expected pay,” he said.
Preparing to retire
Early retirement is the time to plan for protection against chronic illnesses that require care in retirement, Pearson said.
“There are more options [at that age] … It can be less expensive if you plan early,” he added. “The ‘early’ might be a married couple in their late 30s who don’t plan to have children and have extra cash flow after retirement savings, or [in their] In the late 50s, that’s when education spending mostly ends,” he said.
Your golden years
If you’ve recently retired or are in retirement, one option to protect your money from outliving it is a single premium immediate annuity, Ivan Ilan said., the founder who Aligne Wealth Protection in Los Angeles.
This simple form of annuity requires a lump sum upfront, which is usually irreversible, and pays you an immediate lifetime income. (This is in contrast to a deferred annuity, which begins payments at a future date).
It is important to note that they do not address inflation risk, he said.
“Annuals aren’t bad in and of themselves — it’s all in the application,” Ilan said. “But there’s no free lunch – you’re essentially giving it a lump sum, but the cash flow can be better than a bond.”