4 Ways to Protect Yourself from Financial Disaster

Natural disasters are often devastating partly because they come without warning and they leave a trail of destruction that can take years to overcome. Financial disasters can have the same impact on a person, sometimes coming without warning and leaving that person with few options and little hope of recovery. There is protection available that can shield us from many of these financial disasters. Here are 4 examples of financial protections that everyone should have in place.

- Health Insurance: There is a major political debate going on in the US about the future of the health insurance industry and a lot of the need for reform comes from the millions of people with no health insurance. An unforeseen medical complication or necessity could literally ruin these uninsured individuals and families financially. Most employers offer insurance options as a benefit, but if you don’t have insurance through your employer, you should at least have a policy in place that will cover major medical expenses. You may also qualify for health insurance through your state if you meet their income requirements.

- Disability Insurance: Another scenario that could be financially devastating is an unforeseen disability that gets in the way of an individual’s ability to work and earn an income. Your earning power is one of your most important abilities in life and without it life is much more difficult. Disability insurance is designed to replace your income if you become disabled. Disability insurance is different than worker’s compensation, which only becomes effective if you’re hurt while on the job. Disability insurance will take care of you no matter how or when you’re disabled, and many employers offer this as a benefit that you can opt into.

- Long Term Care: For older Americans, their entire nest egg can be wiped out with a stay in a retirement home or an assisted-living center. The problem for many people is that they have too much money to qualify for state aid but not enough money to fund an extended stay in a home. Long Term Care insurance is designed to cover the costs associated with growing old that health insurance and Medicare don’t cover. This insurance is costly and you may never use it, but your heirs will be glad you found a way to fund your final years without spending their inheritance.

- Umbrella Policy: An umbrella policy is insurance against a lawsuit that could ruin a person financially. This insurance can protect you above and beyond limits on your auto policy, your homeowners policy, and other insurance you may have in place. High net worth individuals are often targets for lawsuits and getting sued without protection in place can be another financial disaster. The nice thing about an umbrella policy is that it is usually fairly affordable, with a million dollars worth of coverage available for less than $300 a year–a small price to pay to protect your net worth.