David Lerner Associates: Protect Your Family
One of our greatest assets is the ability to earn income. Most fathers provide for their families’ needs, and should this ability be interrupted or taken away, it could mean serious problems for the family.
We protect our other assets (our home, our car, our life), and yet many of us never consider the importance of providing adequate income in the event of disability. It is estimated that almost one of every seven people will be disabled for at least five years before the standard retirement age of 65. It is also estimated that more people lose their homes each year because of the wage earner's disability than because of his or her death. Fortunately, there are ways of protecting your income if you become disabled. You can earmark certain assets to be used as a substitute for a paycheck; this is often called "self-insurance." Or you can transfer your risk to an insurance company by purchasing disability income insurance.
Earmark existing assets
In some cases, you may be unable to purchase a disability insurance income policy, or for some other reason, it may make more sense not to do so. Instead, if you have adequate resources, you may be in a position to adopt a strategy of self-insurance. Self-insurance typically involves setting aside (or "earmarking") a portion of your existing assets to be used as a substitute for your paycheck if you ever become disabled. The amount you earmark will vary depending on numerous factors, including your risk, your income and expenses, and the other benefits you would receive in the event of disability. You might choose certain assets to be used for this purpose, set aside a lump sum, or set up an accumulation plan.
Transfer risk to insurance company
The reason we buy insurance of any type is so that we can transfer our risk to an insurance company. Although you can never completely eliminate risk, purchasing a disability income insurance policy shifts the risk of loss of income to the insurance company. Because it is a large institution, the insurance company is in a much better position to shoulder this risk than you are as an individual. This is because the insurance company pools the risks of many individuals, the majority of whom will probably never become disabled.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
Some of this material has been provided by Broadridge Investor Communications Solutions, Inc.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.