Preparing for the unexpected: disability, LTC and life insurance

Key Points

  • Life is full of surprises. It's important to prepare for unexpected events.
  • Disability income insurance can help fill the gap if you are no longer able to work.
  • Life and long-term care insurance can provide valuable protection for your family.

Life today is changing. People are living longer and working longer — well into what was once considered the traditional retirement years. At the same time, family and friends remain a top priority. This changing dynamic may mean you are in for more of life's surprises.

So, how can you prepare for the unexpected events that come with life's inevitable changes and help look out for your loved ones?

Disability, life, and long-term care insurance can help provide financial security in hard times

1. Disability income insurance

Your income may be your largest asset, so it's important to consider protecting it. If you are approaching retirement, it's also important to keep in mind that any loss of income can impact your retirement savings — and your future — in two ways:

  • You may no longer be able to contribute to your retirement accounts.
  • You may have to withdraw from your retirement savings to meet living expenses, jeopardizing your future financial situation.

Employer insurance isn't always enough

Don't assume that you are fully covered if you already have employer-sponsored disability income insurance. Here's why:

  • Most employer policies cover only two-thirds or less of your salary.
  • These policies often do not cover any bonuses or commissions, which can be a significant amount of annual income.

How much does disability insurance cost?

  • Most disability insurance premiums range from 1 to 3 percent of your annual compensation per year, depending on your age, income, occupation and health benefit you select.
  • Prices can also vary depending on what types of disabilities are covered. Many policies do cover bonuses and commissions.

2. Life insurance

It can be a comfort to know protection is in place for your loved ones if something happens to you. That's where life insurance comes in.

  • Survivor income. Life insurance is about protecting your loved ones. That's especially true during retirement when the death of a partner can have a dramatic effect on the surviving partner's retirement income. In that situation, life insurance benefits can help fill the gaps in pension and Social Security income and allow your partner to maintain the same standard of living.
  • Wealth transfer. Retirement is often the time when people consider how they would like to be remembered. This includes efficiently passing assets to family or other causes they care about. Life insurance can be an efficient transfer vehicle.

Two main types of life insurance

  • Term life insurance. These policies offer coverage for a set period of time, usually 10, 15, 20 or 30 years. When the term ends, people who want to continue coverage usually must buy a new policy at a higher rate.
  • Permanent life insurance. These policies, also called cash-value insurance, are often considered for longer-term needs, and for retirees, it can be a great way to supplement your retirement income. And if structured properly, this solution is flexible, allowing you to be in control of when and how you access the money.

Both types of policies provide security via tax-free death benefits and permanent insurance also provides the opportunity to grow assets on a tax-deferred basis. Consider talking to your advisor about how this could work with your retirement planning.

3. Long-term care insurance

Costs of long-term or extended care can be substantial, even for someone with a good amount of retirement savings. For some people, long-term care insurance can help. These days there are more types of extended or long-term care insurance available than before.

  • Traditional long-term care insurance. These policies usually cover nursing home and home health care costs for a set number of years. Premium costs depend on your age, health and amount and type of coverage.
  • Life insurance with optional coverage for extended care provisions. Many life insurance policies offer optional riders that allow you to access the policy benefit for chronic illness or long-term care expenses.
  • Life and long-term care hybrid policies. These policies offer both a defined death benefit and extended or long-term care insurance coverage. As with all these policies, it's important to carefully consider the details and what's important to you.

Be financially prepared for whatever the future brings

Protect yourself from the certainty of uncertainty. Using our Confident Retirement® approach, your Ameriprise advisor can help you determine if you have the right protection for you and your family.