Sunday, November 12, 2006

What is the most important insurance for young people?

During a meeting with a colleague at big company, the topic of disability insurance was discussed.

I'd like to strongly encourage all young people under 40 to make sure they have some type of disability coverage. If you are not married or without children, it is the most important type of insurance you can have (after health insurance). Life insurance won't do much if you don't have a spouse or children to support after you pass on, but imagine being disabled - unable to work - and have no source of income other than what may be available from social security. Living in poverty for 30-80 more years is certainly not the reason why many of us work so hard.

Furthermore, if you do have a family to support - the disability insurance will be there when you're not able to earn the salary they expected you to contribute. Your not dead, so life insurance won't help.

My premiums are fairly cheap, as I started my policies in my 20s.

One of the golden rules is to make sure you pay your disability premiums with post tax dollars - that way your benefits will not be taxed. The end result is the 50-65% of your salary that you receive as a benefit is closer to what you are accustomed to living on - rather than a drastically reduced 40% after taxes.

Most employer sponsored group disability programs are fairly cheap - often a bargain.

So see what you can do. And cover yourself and your family.


PS One interesting option is to obtain a COLA or x% annual adjustment to protect yourself from the siginificant inflation we see in medical expenses.


BAD said...

Any recommendation on companies to check out for those who do not have employer sponsored programs?

Thanks :)

makingourway said...

I'll put up a post sharing my thoughts on buying disability coverage.
I've had good experiences with MONY, Berkshire Life and Standard Insurance, though I don't know if MONY is adding new business.