4 Ways to Protect Your Family from Financial Ruin - picture of baby feet inside mom's hands inside dad's hands

4 Ways to Protect Your Family from Financial Ruin

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September is “Life Insurance Awareness Month,” so all month long we’ve been talking about how to protect your family (and your assets) in the event of your death. Getting a good term life insurance policy is a great way to do that. Term life policies are incredibly affordable, typically only about $25/month for a health 25-year-old for $250,000 worth of coverage. How can you beat that?

Additionally, term policies are almost always annually renewable, meaning that you don’t have reapply or take a new medical exam each year. Seriously, people don’t realize how important this is. What that means for you is this: Your life insurance company can’t raise your rates or decline to cover you in the event that you develop an illness. You’re already covered. So, if you become a diabetic or suffer a debilitating injury, you’re still covered at the same cost – provided you continue to pay your premiums, of course.

So, obviously, we think life insurance is important. But, you can’t just buy a life insurance policy and think that your family is completely taken care of. There are several other pitfalls and products that you need to consider if you truly want to protect your family and your assets.

3 Other Ways to Protect Your Family and Assets

Disability Insurance

Your most important wealth-building tool is your income. Losing that income for an extended period of time can destroy the wealth that you have built, and it could take decades to recover. Still, purchasing disability insurance is something that is extremely easy to put off, especially since it can be expensive when not purchased in a group setting.

One way to decrease the cost is to avoid short-term disability insurance all-together. Instead, build your emergency fund large enough so that you can handle losing your income for 6 months or so. Most long-term disability policies will have an “elimination period” – or waiting period – of 3 to 12 months before benefits kick in anyway, so that emergency fund is important. If you can, enroll in your employers long-term group coverage. This is usually very affordable (a few bucks a month), and it can typically cover you for 2 to 5 years. If you’re purchasing disability on your own, try to find a policy that covers your “own occupation” and not just “any occupation.” You may pay a little more for it, but you’ll get a lot more should you ever need to use it.

Last Will and Testament

Here’s another important layer of protection for your family and assets. You really need to complete a last will and testament, especially if you have kids. Without a will, you’ve elected the government to be in charge of all of your assets. You’ve also elected the government to decide who will raise your children. Who wants that? Personally, I’d rather decide what happens with my kids than some judge.

These days, there really is no excuse for going without a will. You don’t even have to hire a lawyer to get one. If you don’t have a lot of complicated assets, all you really need is a basic will. There are numerous websites that can help you create a state specific, self-directed will…and they’ll do it for hundreds of dollars less than you would spend by going to a lawyer’s office. We got ours from LegalZoom.com (affiliate link), and it only took about 20 minutes to complete. Seriously, stop going bareback on this and get your will today.

Health Insurance

We all know that medical costs can be sky high. But, did you know that medical issues are the number one cause of bankruptcy in the U.S.? Although Obamacare was supposed to decrease this number, it certainly hasn’t eliminated it. According to USA Today, more than 1.7 million Americans still lived in a household experiencing a medical bankruptcy as recently as 2013.

While the success of Obamacare is debatable, it does allow low-income families the ability to have some sort of coverage. Again, that speaks nothing to the quality of the coverage available, but it is better than nothing. Low-income families can also apply for subsidies to decrease their premiums and deductibles. Self-employed people have found it a little more difficult to obtain coverage. One great way to cover your family without the exorbitant costs of Obamacare is to look at healthcare sharing ministries. While not a perfect option, they are a way to protect your family in today’s health insurance climate.

Wrapping It Up

There have been times in my life when I have gone without protection in many of these areas. I’m not proud of it, and it can really be a scary. Over time, I’ve learned that making money should only be part of my long-term financial plan. And the same should go for you.

Smart financial planning means protecting your family from losing everything that you’ve built due to a catastrophic event. Consider using these protective options today.

What measures have you taken to protect your family and assets? 

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10 Comments

  1. We *should* draw up a will, but we haven’t…yet. Maybe this post is the kick in the pants we need. Lots of these points are relatively easy to dismiss with the “we’re young” excuse, but you make excellent points that that doesn’t really hold any water in the case of an emergency or the unthinkable.

  2. This is a great post! We have all three areas covered – the will was the most recent. We don’t have kids yet, but we do have a few assets now and I’ve seen the headaches it causes when a will isn’t in place. No one wants to leave work to their loved ones in a time like that.

  3. Wills are SOOO Important. In North Carolina, if you don’t have a will, your assets will be split between your spouse and your living parents. That’s just nuts (how many people want their parents to receive their assets)!

    If you work for any government organization (including a university), you can get free legal council and help drafting up your will (and free notarization too).

  4. Right now I’m single so the only option that makes good financial sense is health insurance through work. I have life insurance through work and that, plus my assets, would help my family out a lot.

  5. We have all four in place! Especially now that we are parents, we feel it’s extra important to have our financial ducks in a row these days. It’s not just us we have to worry about anymore!

  6. We have a little toddler and a second baby on the way. We really should have a will. Every time I read about the importance of wills, I get a pang of guilt and anxiety. We must do this!! I am not sure if you can do a will online without a lawyer in Canada. Does anyone know?

  7. We are definitely insured to the nines at the moment! We struggle with the question of what insurance to carry once we reach early retirement. We’ll theoretically be fully self-sustaining, so won’t *need* life insurance. (Though a small term policy on each of us still feels like a good idea.) We likely won’t carry any disability coverage since we won’t be reliant on earned income. Of course we’ll have health insurance, though! The one type we struggle the most with is whether to get long-term care insurance. The cost of long-term care could quickly eat up our savings, but the insurance is relatively costly… curious if others have thought about this and come to a good conclusion.

  8. I have all those things. I didn’t enjoy the process to obtain and I certainly don’t enjoy the payments, but I never want my family to have to hold a spaghetti dinner or chili supper to raise funds for my funeral expenses!

  9. I have secured them health insurance for every one of them. Probably, I’d consider my last will and testament by the time I have kids and older than 45 years so that every financial aspect has been already taken care of.

  10. Most of those medical bankruptcies that you refer to come from people who do have medical insurance in place. The problem is that too many people have no emergency fund, or disability insurance. They live check to check, and then lose an income and have to cover deductibles and out-of-network charges.

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