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: August 13, 2019

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 are 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 and provides benefits almost immediately. Long-term disability can provide years of coverage, but you will have to wait longer to begin receiving benefits. 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 efficient way to address several financial planning goals through one policy.

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: Term life insurance covers you during a set period of time and is usually the most affordable option, but only in the short-term. When your policy term ends, premiums can rise substantially.
  • Universal life insurance: Universal life insurance provides coverage for as long as you desire and offers flexible coverage levels, which affects the premiums you pay. The cash value of the policy builds over time and is tax-advantaged. You may be able to use the cash should you need it or invest its value for the chance of earning a return on your investment. 
  • Whole life insurance: Whole life insurance will provide lifetime coverage. However, policy owners will typically pay higher premiums that are fixed and cannot be reduced. As with most permanent life policies, whole life is tax-advantaged and builds cash value that you can use in different ways.

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. 2017.
2“Disability income insurance.” U.S. Bank. 2018