Life Insurance Blog

Protecting your income
February 9th, 2009
in Life Insurance

When you are looking to protect your income for your family it is important to look at your different forms of protection.   It is important to look at your disability insurance (DI) and make sure that you are covered if you were to suffer a long term disability.   If you can’t afford to be out of work with no paycheck for more than 6 months than you should secure a DI policy.  When selecting a DI policy it is important to read to contract closely in regards to what you must be disabled from to receive compensation.  Some policy’s pay only if you cannot do any occupation.   It is better to secure a policy that pays based on you not being able to do your own occupation.  A true Own Occ (Own Occupation) policy is much better protection than Any Occ (Any Occupation).   Make sure you understand and read the language on this as it is important.  Also, it is important that it will provide you enough income to survive.  Typically you can qualify for up to two thirds of your existing income as the benefits are not taxed.  Often times people will think they can live on less if disabled, but I doubt you would want less than you are currently making if you are disabled.

The other important way to protect your income is to have enough life insurance.    If you make 100k a year, you want to buy enough to spin that off in interest, so your family still has the principal for safety.   For example, at a conservative interest rate of 5% your family would need a death benefit of two million dollars to generate 100 k a year in interest.  That doesn’t include any inflationary factor, but it at least keeps the income level the same.    If you want to add some more to increase the income to match inflation, you would simply buy more death benefit.    Rarely, does a survivor complain that they received too much death benefit.

Talk to a Paramount consultant to make sure you are protecting yourself against downside risks and that you protect your income for your family.

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