No one wants to think about what would happen in the event of death or disability - let alone plan for them.
Still, it’s important to consider how these events would affect your loved ones. Both emotionally and financially.
For starters, you can minimize the financial impact of your death and disability with:
That's why it's essential to factor in the needs of others when weighing your insurance needs. Here's how a little extra preparation can make all the difference in the world when times get tough.
If you’re single without dependents, you may not see a need for disability or life insurance.
But consider a scenario in which you can no longer work due to injury or illness. Who will provide financial support during your disability period? Who will care for you if your disability is permanent? Disability insurance will protect your income, paying you a monthly benefit that reflects your earnings.
In the event of your passing, expenses for your funeral and settling your estate will arise. A term life insurance policy will cover these costs without burdening loved ones.
Someday, you may want to allocate a portion of your earnings to care for your parents. If you can longer provide that support due to death or disability, will they have the resources to pay for long-term care?
Some people buy less insurance because they have a successful spouse. After all, they could live comfortably on their own income.
However, chances are your combined lifestyle depends upon both of your incomes. Without your contribution, what would happen to your significant other? Will he or she be able to afford the mortgage on your house on one income? If you become disabled, will your spouse be able to pay off any remaining student loan debts? If you pass unexpectedly, will your spouse be able to cover funeral and estate settlement costs?
You should also account for the significant time off from work a widowed spouse needs to grieve. Likewise, the spouse of a recently disabled person may need to take time off to help transition. But what if this time-off isn't paid? Insurance benefits can:
- Replace some of your lost income.
- Cover time-off for your spouse or significant other.
Physicians with children typically understand the value of life and disability insurance. But it's easy to underestimate how much coverage you truly need.
As children grow older, basic living expenses like food and clothing only increase. Your life insurance policy should account for this. In fact, life insurance can also help pay for college if you pass. That's why it helps to factor in rising tuition costs.
Many doctors aspire to open their own private practice someday. If this appeals to you, it's important to consider the impact your death or disability would have on your employees and partners.
In the event of short-term or long-term disability, business overhead expense insurance can help you keep your practice running.
Unlike disability insurance, this covers monthly expenses such as:
Premiums for this type of insurance are business expenses, which makes them tax-deductible.
If you pass away, term life insurance can help:
- Your family pay off business debts.
- Recruit somebody to buy or take over the practice.
- Cover applicable estate taxes.
As for your business partners, life insurance benefits can help them buy your shares of the practice from your estate.
This buy/sell agreement stipulates that if a partner passes away, the remaining partners may buy out the surviving family’s share at a previously agreed upon price.
This is a difficult topic to discuss - there's just no way around it. But as you can see, it's vital that you understand how the needs of others should factor into your:
- Individual disability policy.
- Individual term life policy.
- A business overhead expense policy.
In doing so, you are preparing your loved ones for the best possible path to recovery in case tragedy strikes.
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Joel Palmer is a writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.