Getting the Right Size Umbrella
One of America’s foremost financial counselors, Dave Ramsey, says, “It’s gonna rain. You need an umbrella.”
Of course, he was referring to having an emergency fund of cash available. But the same truth can be applied to having disability insurance. Maybe you’re not guaranteed to get disabled, but if it does “rain,” isn’t it a good idea to make sure you have an umbrella to protect you?
And if you are going to carry an umbrella; it’s about having one that is the right size so your shoes don’t get wet.
In an earlier post, we talked about the ‘needs analysis’ that insurance agents go through with clients – assessing how much needs to be protected by a DI policy. What also is considered is how much coverage you would ultimately need, and there are some factors to consider when discussing this with your agent or broker.
Once the needs analysis is finished, what is next is to determine how much coverage you need, which is usually calculated by taking your monthly income and multiplying it by the average number of months a disability lasts at your age. This gives a ballpark figure of the size of your “umbrella” in case it rains. It’s very possible that for most people, the final number is going to be at least six figures in terms of lost income in your household if you were to become disabled.
Your total income insurance needs can basically be discussed using three numbers – the monthly cost of living, the monthly income and the average long-term disability loss. Once you and your agent have those numbers, you can then begin the process of “shopping” for the right policy for you and your needs. With so many options, it is important to get an apples-to-apples comparison, and having these numbers is the first step.
For more information about finding your three DI numbers, visit www.DoctorDisability.com and talk to one of our trained professionals.