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What type of insurance should you have at different stages of your life? When asked, financial advisors singled out disability and life insurance as the most important types of coverage at any stage, as they apply throughout our lives.
Also, the advisors who discussed often overlooked considerations for different points in your adult life. Here’s a look at some age-specific insurance tips, from your college days to your golden retirement years.
“If you take out a private student loan … and that loan is co-signed by a parent and is not discharged at your death, you need life insurance to cover the loan,” said certified financial planner David J. Haas, owner. of Cereus Financial in Franklin Lakes, New Jersey.
Because the need is temporary, for the life of the loan only, temporary life would be appropriate, he said.
“If you’re working, you almost certainly need disability insurance,” said Sean M. Pearson, CFP, associate vice president at Ameriprise Financial in Conshohocken, Pennsylvania. “Most big employers offer it as a benefit, but that doesn’t mean you get enough.”
A note about life insurance: The two main categories are generally called “term” (insurance for a defined period of time) and “permanent” (insurance for an indefinite period of time; that is, for life).
It’s important to understand your coverage, he said. Plans can cover total disability, which is defined as when the worker is unable to work, or they can only cover a situation where the worker is unable to perform part of a job or requires reduced hours.
“For example, if you were making $100,000 a year before an injury or illness, and after a change in your health you could still get a job that pays $40,000 but you can’t continue in your current role, you may you can’t collect. insurance,” Pearson said.
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Getting married and starting a family is when things get more complicated, said CFP Robert Fragasso, managing director of Fragasso Financial Advisors in Pittsburgh.
“If you have a mortgage and need two incomes and want to start saving for college, temporary life insurance would be appropriate until those debts are paid off,” he said. “For obligations that occur after you pass, such as death taxes, buying a business or supporting a disabled child, you should look for permanent insurance.”
Long-term disability insurance is often overlooked at this stage, said Cereus Financial’s Haas.
“The most important thing is the younger you are, because it covers a lifetime of earnings that will be in jeopardy if you become disabled,” he said.
Pearson said to be sure to “carry” your disability coverage or take it with you if you take a leave of absence to care for a child or family member. “If a stay-at-home parent wants to return to work but has a change in health during their time as a caregiver, that person may not be able to return to work as quickly or at the expected salary,” he said. to point.
Getting ready to retire
Early retirement is the time to plan for protection against chronic illnesses that may require care during retirement, Pearson said.
“There are more options [at that age] “This can be less expensive if you plan ahead,” he added. “”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] the late 1950s, when education spending has mostly ended,” he said.
Your golden years
If you’re recently retired or in retirement, one option to protect yourself from outliving your money is a single premium immediate annuity, Ivan Illan said., founder of Align Wealth Preservation in Los Angeles.
This simple form of annuity requires a lump sum up front, which is generally irrevocable, and pays you a lifetime income stream immediately. (This is in contrast to a deferred annuity, which begins payments at a future date.)
It’s important to note that they don’t address inflation risk, he said.
“Annuities themselves aren’t bad; it’s all in the application,” Illan said. “But there’s no free lunch – you’re essentially giving away that lump sum, but the cash flows can be significantly better than the bonds.”