Who Pays the Bills When You Can’t?
Your assignment today is to pull out your check book, or go to your debit account’s auto-pay screen. Then list your regular monthly bills…the ones recurring every month: rent or mortgage payment, utility bills, cable/phone bills, car insurance, homowners/renters insurance, groceries, car/automobile lease payments, health insurance, gasoline, oil, maintenance…these support your life style. Okay, add ’em up. The total is what you need, every month, to float your boat…and those are net-after tax numbers.
Now, imagine your income, investnments and savings drying up over the next several weeks. How do you pay the bills then? You could start robbing banks…but after the law grabs you, your life will become a worn cot behind steel bars and bologna sandwiches every day, plus a three hundred pound room-mate with a digestive problem and bad breath…all courtesy of the tax payors.
A sudden accident or lingering illness could rob you of your ability to generate income for yourself and your family…and take away your ability to pay those critical bills every month. If you think it won’t happen to you, don’t be so sure. The odds of your becoming disabled and staying that way for many months or years is much greater than that of your dying before age 70.
For many years businesses have hedged their bets by obtaining Income Replacement Insurance on the lives of key employees as a way to shift the disability risk to insurance companies. Thus, when a key employee is disabled and no longer able to perform, the insurance company provides income in the form of disability payments to the employee, freeing up salary dollars to allow the business to bring on a replacement…just makes good business sense.
It follows that you too should apply that good business sense to your life. In your household, you are the “Key Employee”…if you are married, and you both work, your household contains two “Key Employees”. Who brings in the money when you can’t? Who pays the bills when you can’t? Unless you hit the Lotto in the past few weeks, you do not control enough cash to carry you through an extended time of no income.
Look into Disability Income Insurance today. Talk to your insurance agent or broker about it. As a rule of thumb, figure on paying an Annualized premium equal to about month’s benefit pay-out…hedging eleven months with one month’s benefit amount. As the premium payor, your Disability Income Insurance benefits are income tax free, and that also helps with the bills.