Wealth management  - U.S. Bank

3 types of insurance you shouldn’t ignore 

You may already be covered for the insurances you need day-to-day: health, auto and property. But those aren’t the only types of insurance you might need during your lifetime. 

Tags: Insurance, Planning, Be prepared
Published: September 13, 2018

As your needs and the needs of your loved ones change, you don’t want to ignore three key types of insurance: disability, long-term care and life. Not only can these three protect your family from unforeseen circumstances, but they also can play a significant role in smart financial planning for your later years, conserving your retirement nest egg.

Here’s a few key details you should know about each.

1. Disability insurance for when you are unable to work

Some people may assume that the government will provide disability insurance, but federal and state plans are particularly strict in their definitions of disability. In fact, the Social Security Administration rejects nearly two-thirds of all applications for Social Security disability benefits.1

Are you prepared for an unexpected injury or illness that could compromise your ability to work? That is where private disability insurance comes in.

Private disability insurance, whether through an employer or purchased individually, offers a more lenient definition for qualifying: You simply must be unable to perform your occupation or an occupation that matches your training, education and experience.2 Choosing private coverage can act as an important safeguard should you be unable to work for an extended period of time.

There are two types to consider: short- and long-term. Short-term disability typically provides three to six months of coverage, but kicks in almost immediately. Long-term disability can provide years of coverage, but you will have to wait longer to begin receiving assistance. Long-term disability insurance replaces a portion of your paycheck — typically 60 percent — to help you meet your daily expenses and recurring payments, including your mortgage.2

2. Long-term care insurance for aid in your later years

Even with substantial retirement savings and emergency funds, costs for long-term care can be overwhelming. To be better prepared, consider investing in long-term care insurance, which will cover a portion of medical expenses.

Some life insurance policies even offer a long-term care component, which is an easy way to cover several bases in one bundle.

There are also stand-alone policies that cover nursing homes, hospice services, assisted-living and at-home care for a set number of years. Premiums vary based on a number of factors, including age, general health and the exact type of coverage.

3. Life insurance for helping your loved ones

Life insurance is more commonly known, but it can cause confusion because of the many options. In its basic definition, life insurance guarantees a lump-sum payment to your beneficiaries when you die. This can help protect your loved ones should you leave behind a sizable loss of income, unresolved debt or other financial responsibilities.

There are three main types of life insurance, and each offers specific advantages.

  • Term life insurance: Like its name suggests, term life insurance covers you during a set period of time and is usually the most affordable option. However, when the term is up, participants will need to buy a new plan at a higher rate.
  • Universal life insurance: Universal life insurance provides lifetime coverage but comes with higher premiums compared to term. However, the policies are flexible. You can raise or lower your premium and your coverage amount.
  • Whole life insurance: Whole life insurance also does not need to be renewed and will provide lifetime coverage. However, buyers will pay higher premiums that are fixed and cannot be reduced. These premiums do build up a cash value that you can use in different ways and are tax-deferred. Policy details will outline how a cash value can be used.

Safeguarding against the unforeseen

Life is unpredictable, but you can prepare for it by opting for disability, life and long-term care coverage that will protect you when you or your loved ones need it.

Not sure how much insurance you need? Learn more about your insurance options.

1“Annual Statistical Report on the Social Security Disability Insurance Program.” Social Security Administration. 2016.
2“Disability income insurance.” U.S. Bank. 2018