Are You Protecting Your Biggest Asset with Disability Insurance?

Retirement savings. College savings. Estate planning. Those are the three topics that most of my clients are willing to discuss with me. These things aren’t necessarily enjoyable to discuss, but most people agree that they are important for a comprehensive financial plan. Then, there is the one important topic that almost everyone wants to completely avoid – disability insurance.

Maybe people don’t want to talk about this insurance simply because of its name: disability insurance. Life insurance isn’t called “death insurance”, so maybe disability insurance should be renamed to “income protection insurance” or “paycheck insurance”. This might give Americans a better understanding of the benefits and why they should purchase it.

Disability insurance helps protect your largest asset – your earning potential. Why is that important? Because we all rely on our incomes. You will earn a lot of money during your career and you will likely count on this money to support every aspect of your lifestyle – the ability to save for retirement, buy cool stuff, pay bills, go on vacation, etc. (If you would like to see how much your current income is worth, calculate it at www.whatsmyeiq.org.) Now comes the tough question: If you don’t have disability insurance, how do you replace this asset if you lose the ability to earn an income due to a sickness or injury?

And remember, retirement savings are for retirement, so having an impressive retirement account is not the same as having disability insurance. If retirement savings are withdrawn prior to retirement to maintain your lifestyle during a disability, there may be little left by retirement. Disability insurance not only protects your income, it also allows you to preserve your other assets for their intended purposes.

One of my clients told me that she thinks of her disability insurance policy as the “warm and fuzzy” aspect of her financial plan. It’s a policy that’s there to take care of her if faced with disability. She plans on living a long and healthy life, with plenty of vacations and discretionary spending. She purchased disability insurance because she recognized that her life would look very different from the one she had planned if she didn’t have an income to support it.

If income protection is a topic you’ve been avoiding, consider reviewing your need for it and include it as part of your financial analysis. If you aren’t sure where to start, a financial professional can help you understand the need for this insurance and design a customized policy that is in-line with your goals and objectives.

Do you have questions about any of these steps? If you don’t have one, get connected with a financial professional in your area, or follow me on Facebook or Twitter.

Insurance products from the Principal Financial Group® are issued by Principal National Life Insurance Co (except in NY), Principal Life Insurance Co. Securities and advisory products offered through Princor Financial Services Corp, 800/247-1737, member SIPC. Principal National, Principal Life and Princor® are members of the Principal Financial Group®, Des Moines, IA 50392. T15031603py