Financial ruin is an unpleasant prospect, but it’s also a possibility everyone should consider. Of course, it’s easier to think about the good things in store, like buying your first home or traveling in retirement. However, preparing for a less-than-perfect future is a reality that we all must face.

A good financial plan should protect your assets as well as your future income. And that means insurance. Here’s how you can protect your financial future.

Disability Insurance
A young professional’s biggest asset is not a home, business, or savings account. It’s their capacity to earn an income. How would your future look if a disability rendered you unable to continue your job, or engage in any form of work?

When you have a family or dependents to care for, the financial impact of disability compounds. Unfortunately, statistics show that people in their working age are much more likely to become disabled than to pass away. For example, a 27-year-old female has a 5x higher chance of suffering a disability than dying without a prior disability.

Many employers offer short and long-term disability policies as part of a benefits package. However, it’s important to know that this type of coverage is not always adequate. While group policies benefit from lower premiums, they typically have a benefit cap that limits the income you can receive.

A decent short-term policy will pay between 60% and 70% of your annual salary for three to six months. After which, a long-term disability policy can come into play and continue paying for an extended period, such as until you reach retirement age.

A key factor to consider when shopping around for a disability policy is how your premiums are paid. When paid with pre-tax dollars, such as through a payroll deduction or employee benefit, all disability benefits received will be subject to income taxes. Alternatively, if you pay your premiums with after-tax money, the benefits will be tax-free. This can make a significant difference to the actual cash you earn.

Life Insurance
When you pass away, your personal need for income no longer exists. However, your grieving family may need to replace your income for many more years to come. That’s the most important reason to consider a life insurance policy.

A term life insurance policy is one of the most affordable ways to support your family during this difficult time. These plans offer a high degree of flexibility and extended coverage that matches the anticipated length of your working career. For many, a level premium term policy is the smartest choice. This means you can buy the amount you want for the time you need, such as 10, 20, or 30 years. You will want to consider mortgage repayments, college costs, unpaid loans, and living expenses when deciding on a policy.

Like disability insurance, many employers also offer life insurance. These policies might be less expensive as the insurer’s risk is spread across of a group of policyholders, but if you lose your job, you lose your insurance too.

Protect Your Financial Future
Income loss can be devastating, but by putting the appropriate coverage in place today, you can rest easy knowing your family and hard-earned assets are safe. After all, you have already invested years’ worth of time, effort and hard work to build the life and career you have, so don’t leave it open to the unexpected.