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What kind of insurance should you have at different stages of your life? When asked, financial advisors highlighted disability and life insurance as the most important type 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 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 after your death, then 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, only for the life of the loan, the term would be appropriate, he said.
“If you’re working, you almost certainly need disability insurance,” said Sean M. Pearson, CFP, associate vice president with Ameriprise Financial in Conshohocken, Pennsylvania. “Most large employers offer it as a benefit, but that doesn’t mean you have enough.”
A note on life insurance: The two main categories are generally referred to as “term” (insurance for a specified period of time) and “permanent” (insurance for an indefinite period of time; ie, lifetime).
It’s important to understand your coverage, he said. Plans may cover total disability, which is defined as when the worker is unable to work, or they may cover only a situation where the worker is unable to perform part of a job or requires reduced hours.
“For example, if you were earning $100,000 a year before an injury or illness, and after a change in your health, you could hold a job that pays $40,000, but you are unable to continue in your current role, you may not you are able to collect insurance,” said Pearson.
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Getting married and starting a family is when things get more complicated, said CFP Robert Fragasso, CEO of Fragasso Financial Advisors in Pittsburgh.
“If you have a mortgage and need two incomes and want to start saving for college, life insurance would be a good fit until those debts are paid off,” he said. “For obligations that occur after you pass, such as death taxes, a business purchase, or supporting a disabled child, you should seek permanent insurance.”
Long-term disability insurance is often overlooked at this stage, said Cereus Financial’s Haas.
“It’s more important the younger you are, because it covers a lifetime of income that will be at risk if you become disabled,” he said.
Pearson said to be sure to “carry over” your disability coverage, or take it with you, if you take time off to care for a child or family member. “If a stay-at-home parent wants to return to work but has a health change during their time as a caregiver, that person may not be able to return to work as quickly or at the expected pay,” it noted. he.
Preparing for retirement
Before retirement is the time to plan for protection against chronic diseases that may require care in retirement, Pearson said.
“There are more choices [at that age] … it can be less expensive if you plan early,” 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. retirement, or [in their] the end of the 1950s, when education expenses mostly ended,” he said.
Your golden years
If you are newly retired or in retirement, one option to protect against outliving your money is a single premium immediate annuity, Ivan Illan said., FOUNDER e Align wealth preservation in Los Angeles.
This simple form of annuity requires an upfront sum, which is generally non-refundable, and pays you income immediately for life. (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.
“Annuities themselves aren’t bad — it’s all in the application,” Illan said. “But there’s no free lunch — you’re essentially giving away this huge amount, but the cash flows can be significantly better than bonds.”