If you're like me, you might not have thought of the right answer. This is also one of the reasons I love to browse through the articles over at Ric Edelmans financial planning site, I'm always sure to find a new bit of financial revelation! Ok, in case you're holding your breath I don't want you to pass out. You're most important, or as Ric put's it your largest financial asset is your ability to produce an income.
Ric's article talks about the importance of protecting this prized possession:
For almost everyone who is still working, your largest asset is your ability to produce an income. Thus, the most important type of insurance is disability income insurance (DI). You need it more than any other kind of insurance — more than life, health, homeowners, or auto insurance.
Now, that blew me away. It's never been the topic of financial discussion for me before. I always choose no, no, no, on those pesky credit card applications and phone calls to activate your cards. They try and tell you that for penny's a day you can have all your credit card payments taken care of if you're disabled.
Like everyone else, I just couldn't justify it in my head. Now that little credit card disability insurance is similar, but not exactly what we're talking about. We're talking about insurance that covers a percentage of your income, in the event you become disabled. Like many folks I felt it was adequate enough to opt into the insurance my employer provides. These typically pay about 60% of your income if you're disabled, and have a limited payout period. This just isn't enough.
He talks about 2 big reasons that folks usually don't bother thinking too much about it:
Reason#1: "It won't happen to me"
Reason#2: "It's too expensive"
After Ric hits you over the head with all the reasons why it's such an important financial decision, it really makes sense. I'm off to talk to my insurance agent this week and get me some disability insurance.
I'm going to focus on filling in the gaps from my employers insurance. This should help reduce costs. I have some I got through work a long time ago, but I don't think that quite gets to the point of protection that you really need. If you have availability of disability insurance through work, and never really thought about it, take a second look and get as much as you can. As discussed in another article about getting the most out of your company's benefits:
Life, disability and long-term care insurance. If your employer pays for these coverages, get as much as you can. But if you must pay for some or all of the cost, talk to a financial advisor or insurance agent to see if you can get lower-cost coverage elsewhere.
It's a serious expense that seriously pays off if you need it. Obviously I hope none of us need it, but like any other type of insurance (the case can be made that it's more important than other types!), you want to be prepared. Bottom line, if you earn a living, then you will benefit greatly from disability insurance and it deserves some serious thought and discussion.