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Part 1 of 1-Part Series

Tis the season…for the insurance talk! I know, it’s not the most exciting topic to discuss, but it is one of the most important and an area which everyone should know about and understand. In this case, when we say insurance, we’re referring specifically to life insurance and disability insurance. I must admit when I was younger and this this was brought to me, I scoffed and said I don’t need that. Luckily, I had people around me that knew better and made me see the light. The truth is when we’re young, we think we’re invincible and anything to do with the future comes a distant second. Retirement planning, life insurance, investments…they seem so unnecessary to talk about in our 20’s, but that’s because we were never taught about it. This is knowledge that can have profound life impacts and they should be taught to us in school from young!

But since they weren’t, we’re going to do a light lesson on insurance and why we need it. First up is the most important and most common, life insurance. Life insurance is a contract you agree upon with an insurance company that states in the event of your death, a stipulated amount known as a death benefit will be paid to your beneficiaries. To keep this contract in good standing, your premiums must be paid, usually on a monthly basis, and must be up to date at the time of your death. Additionally, the matter and cause of your death must fall within the guidelines of the insurance agreement known as the policy.

The main reason behind life insurance is to take care of your loved ones in the event of your death. It becomes most vital if your death is unexpected and during your working years because of the loss of income for your family. Not only are they having to deal with an indescribable tragedy, they must also now have to worry about how they will be able to afford to live without your income. A life insurance payout is a comforting security blanket that can ease a lot of that worry and allow your family time to grieve when the time comes.

Disability insurance on the hand is very similar to life insurance, but it replaces death with injury or you being disabled and unable to work. There is a contract, premiums, a payout and a policy, however the benefit would be paid out while you are alive as a pose to life insurance. Imagine how painful it would be for you to not be able to provide for your family because of a disabling event. This insurance alleviates that worry so your finances are well taken care of, along with your family. Disability insurance is available for both short term and long term, however for the purposes of this article, we’re referring specifically to the long-term application.

We use an insurance ratio here at Kismet to calculate whether you have enough coverage for your situation. This is calculated by:

This ratio is factored in with our other financial ratios to let you properly plan for your future with our guidance. No matter how tragic a death or disability is, the sad reality is that the bills will keep on coming. By taking the responsibility of this on early, you can rest easy knowing your loved ones are safe.