April showers may bring May flowers, but March is National Umbrella Month. While ranking high on the list of truly obscure celebrations, this “Month” can still teach us a few things – especially if we think about “umbrellas” that can help us protect our financial goals.
Consider these key areas:
Your vulnerability to emergencies – It’s a good idea to maintain an emergency fund containing three to six months’ worth of living expenses. Without such a fund, you may need to dip into your long-term investments to pay for unexpected, and unexpectedly large, expenses such as a new furnace or a big bill from the doctor. You’ll want to keep your emergency fund in a liquid, low-risk account.
Your family’s financial situation – If something happened to you, how would your loved ones be affected? Would your family be able to stay in your house? Could your children eventually go to college? Would your surviving spouse have enough retirement income to maintain the lifestyle he or she has envisioned? Having adequate life insurance in place can help ensure that all your hopes and plans don’t fall apart upon your passing. Different types of life insurance offer different features. For example, “term” insurance, as its name suggests, is designed to provide a death benefit for a certain number of years. On the other hand, “permanent” insurance, such as whole life or universal life, can be kept in force indefinitely. This type of coverage may also offer a cash value component.
Your current income — If an illness or injury keeps you out of work, even for a little while, the loss of income could disrupt your family’s ability to pay its bills, leading to potentially big problems down the road. Your employer may offer some type of disability insurance as an employee benefit, but the coverage may be insufficient. So you may want to consider purchasing an individual disability policy.
Your ability to live independently – If you’re fortunate, you may never need to spend time in a nursing home or require any other type of long-term care. But no one can predict the future – and it pays to be prepared, because long-term care costs can be catastrophic. In fact, the annual average cost for a private room in a nursing home is more than $90,000, according to the 2015 Cost of Care Survey produced by Genworth, a financial services company. A financial professional can help you find an appropriate way of paying for these types of costs.
Your capacity to protect your biggest assets – Your home is probably going to be the biggest asset you ever own – so you need to protect it properly, with adequate homeowners insurance. It’s also important to have sufficient insurance for your other major assets, such as your car, boat and so on.
Your exposure to property loss or liability – You may someday face costs associated with repairing or replacing your home, auto or boat, or even liability-related expenses. Additional liability insurance – known as an “umbrella” policy –is designed to kick in when your standard coverage on other policies, such as home or auto, has been exhausted.
The sun may be shining in your life today, but it’s always wise to be prepared for the proverbial “rainy day.” So have your umbrellas ready.