1. Disability insurance
More than half of US workers did not have disability insurance in 2020, according to Unum, a national provider of such insurance, and the number was an even higher 70% among Baby Boomers. But this type of insurance is an essential element to protecting your income stream in the event of an emergency.
Not to scare anyone, but there are so many things that could happen that could impact your ability to earn at the level you currently do, even if you could earn something at another type of job. Think about the sports star who blows out a knee and has to choose a backup career to make ends meet. An important factor to figuring out how much coverage you need is the payout percentage—most policies only offer 60% income replacement.
2. Long-term care insurance
Most companies do not offer long-term care insurance as part of a standard employee benefit package, but many now offer it as a supplemental option. Most group employee policies cost less than an individual policy would cost on the open market, and you can buy into at a younger age with simplified underwriting that could exclude you if you are older and develop health conditions.
If you are considering policies on the open market, you will face a vast array of choices, from traditional policies that offer a standard day-rate benefit to hybrid policies that combine long-term care with life insurance policies. There's a lot of fine print and conditions on most of these policies, like waiting periods, exclusions, and cost-of-living adjustments, so you may want to get the help of a professional to get the right policy to suit your needs.
Even if you are wealthy, the cost of a major health event may be hard to manage. Paying out-of-pocket for the care you need may end up diverting your financial plan.
3. Umbrella insurance
Got a dog? Teen drivers? A pool? Really, just having any amount of assets and living a quiet life can still put you in the crosshairs of an expensive liability lawsuit. Umbrella insurance picks up where other liability policies leave off, both in terms of dollar limitations and scope of coverage. Put simply, it provides extra (or "excess") liability coverage and is effectively insurance of last resort, but coverage will not take effect until after other sources of coverage like homeowner's insurance or car insurance have been used fully.
4. Life insurance
Only 54% of AmericansOpens in a new window had any type of life insurance at all in 2020, according to LIMRA, the life insurance trade organization, and that number was down nearly 9%Opens in a new window, over the last decade. While the pandemic ticked up life insurance policy sales at the start of 2021, that still leaves many without adequate coverage.
To figure out what kind of life insurance you need for the members of your family and how much, you may want to consult a financial professional, especially if your financial situation is complicated. They key step is to make sure the principal amount of the life insurance is enough to cover the income or financial obligations of the person covered. If that person makes $1 million per year, you need enough of a lump sum to invest that would generate that much income in a year.
If you're concerned you are not properly insured to protect your income, you can review your insurance policies and calculate your needs, and then shop for insurance policies that suit your needs. You can also consult a financial professional to do an insurance assessment that will look at your whole financial picture and help you assess what coverage will work best for you and your family.