How Different Types of Life Insurance Can Protect Your Income

How Different Types of Life Insurance Can Protect Your Income

Many Americans underestimate their chances of experiencing an illness or injury that would prevent them from working.

In fact, more than one in four of today’s 20-year-olds will become disabled before reaching retirement age, according to the Social Security Administration. Particularly if you have a family to support, the loss of a paycheck can be devastating, especially in a single-income home.

Luckily, there are different types of insurance that can provide financial security — and peace of mind — in the event that your health takes a turn for the worse.

Disability Benefits

Many people believe Social Security will cover their needs if they become ill and can’t work. However, Social Security disability benefits are based on how much you’ve paid into the system over time. Currently, the average monthly Social Security check is about $1,400. Workers’ compensation benefits, which you may receive if you were injured on the job, vary from state to state and only cover a percentage of your salary. These benefits help, but they are not a replacement for earned wages.

Employer-Sponsored Income Protection

Many employers provide long-term and short-term disability insurance as a part of their benefits package. These benefits pay a portion of your income if you can’t work for health-related reasons. Short-term disability insurance usually kicks in immediately or after a short waiting/elimination period and covers you for a short period of time, usually six months or less. Long-term disability benefits require a longer waiting/elimination period, typically six months or longer, and may cover you for years or even life.

In many cases, employees have the option to purchase additional disability coverage to supplement their employer’s policy at the discounted group rate. “I usually tell clients to get the maximum level of coverage they can afford through their employer,” says Jim Nonnengard, Executive Vice President, Head of Regions Investment Services. Often employer-sponsored insurance plans don’t require you to prove insurability. “If you’re older or have a pre-existing health problem, that is an advantage,” says Nonnengard. Some plans can also be rolled over when you leave the company.

Since it’s harder and more expensive to get insurance as you age, preserving plans you purchased when you were younger may save you money and offer greater protection down the road.

Supplemental Life Insurance Coverage

The coverage offered through your employer may not be enough to provide for your spouse or family should you die or become disabled. “This is especially true if you have young children,” says Nonnengard. An emergency savings account with the savings equivalent of six to 12 months’ worth of monthly bills is a great start but may not be enough if there’s a death in the family or a long-term illness. “For the unlikely — but potentially devastating — events, it’s more important to have an insurance plan in place first,” he adds.

A factor of 10 times your annual salary as an insurance payout amount is a good starting point, but you may need more if you have considerable debt or a large family. “One million dollars may sound like a lot of money, but you need to consider what that will be worth 20 or 30 years from now,” says Nonnengard.

When calculating your income, don’t neglect the contribution of spouses whose primary role may be raising dependent children. “You need to ask yourself how much full-time child care would cost,” says Nonnengard. Families with special-needs children may also require additional protection.

How much protection you need and what that will cost depends on many factors, including your income and debts, your age and health, and your family’s future needs.

To determine which insurance types are best for your family, check with your employer’s human resources department or a licensed insurance agent. Having the right safety net in place can mean the difference between comfort and catastrophe. Learn more online and receive an insurance quote from Regions Investment Services.


This information is general in nature and is provided for educational purposes only. Regions makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. Information provided and statements made by employees of Regions should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Regions encourages you to consult a professional for advice applicable to your specific situation.