Most people have life insurance to protect their family against the financial impact of their unexpected death, and they insure their homes, cars, and other personal possessions against financial loss resulting from fire, theft, or damage. However, it's common for many individuals to overlook insuring one of the more important aspects of their financial life--the ability to earn an income.

Have you ever contemplated how long the combined resources of you and your spouse might last if you were suddenly out of work due to an unexpected disability? If your combined resources provide less than 60 to 70 percent of your monthly expenses including taxes and savings, you may be in need of disability income insurance coverage. Whether you need an individually owned policy depends on the extent of your liquid assets, your spouse's income, and other sources of disability income (group coverage at work, workers' compensation, Social Security, and veterans and union benefits).

Depending on your income and the risk level of your occupation, the maximum coverage you can buy will generally replace 45 to 75 percent of your pre-disability earnings. The higher your income, the lower the percentage of replacement benefits. Typically, cost will depend on the risk level of your occupation, your age, your health, and the comprehensiveness of coverage.

To make certain the money you spend on disability income insurance is buying the proper amount and type of protection for you and your family, your contract should include the following:

• A favorable definition of total disability that is consistent with the risk of your occupation and, at a minimum, ensures the payment of benefits in the event you suffer a loss of income.
• A non-cancelable clause that states the insurance company cannot cancel the policy or increase the premium until a certain age (as specified in the policy).
• Benefits that are payable until age 65 or for life.
• A waiting period consistent with your overall financial plan. The cost of disability income insurance declines the longer you wait before receiving benefits. You can purchase coverage that provides benefits on the 31st day of disability or up to two years later.

Now is the time to pay close attention to how much you should spend on disability income insurance. In most cases, it will cost you between 1-3% of your gross income to insure yourself against the risk of a disability. In addition, it is important to periodically review the particular details and provisions of the disability policy you are considering with a qualified insurance professional.

Seven Steps to Estate Planning Peace of Mind

Most of us don’t want to think about or discuss what will happen after we die. Because estate planning forces us to do just that, we tend to avoid it like the plague. However, if you want to protect your family and your assets, creating an estate plan is a necessary task.

Not only does an estate plan ensure that your assets are properly divided among your heirs, it also protects your family from taxes, court costs and attorney fees. If you want to shelter your loved ones from these heavy financial burdens, take the following seven steps for estate planning peace of mind:

Step One: Act now—and keep acting.

Commit to creating an estate plan as soon as possible—otherwise your family will pay the price. If you don’t have an estate plan, federal and state tax laws will determine how your estate is settled, who will receive your assets and how much they’ll have to pay in taxes.

Additionally, your estate plan should not remain static over the years. As your personal or family situation changes over time, you should make the appropriate updates to your plan to reflect these changes.

Step Two: Figure out what you want.

Although much of estate planning involves reducing taxes and avoiding probate, it’s mostly about leaving your assets to loved ones. Consequently, one of the most challenging aspects of estate planning is deciding who gets what.

Before you meet with an advisor, sit down and make these decisions on your own. The key here is to decide what you really want. Don’t try to make choices based on what you think your heirs want. It’s impossible to please everyone, so don’t even try.

Step Three: Gather up a team of pros.

Once you commit to creating a plan and decide how you want to distribute your assets, you’ll need the help of some experts. Estate planning involves many different components, including property law, probate law, taxes, wills and trusts and investments. Don’t try to handle this complicated process on your own. You’ll need to hire a team of experienced advisors to help you build your plan.

Once you assemble your team of pros, remember that this estate plan is about you, not them. You should tell them what it is that you want to do with your estate plan, and they should figure out how to achieve those goals. It’s important that you take the lead—don’t let the experts push you around.

Step Four: Steer clear of federal estate taxes.

Make sure that your estate planning advisors do everything in their power to help you avoid federal estate taxes. For example, when property passes directly to the surviving spouse, this can lead to hundreds of thousands of unnecessary federal estate taxes for your ultimate heirs. That’s why it’s important to tap into tax strategies such as annual gift tax exclusions, lifetime exemptions and gift-splitting to reduce your overall estate taxes. Make sure that your advisors use these tax-saving methods wherever possible.

Step Five: Get in synch.

Because there are various components to an estate plan, it’s important to keep everything well synchronized. You and your advisors should carefully coordinate your ownership of property, trust agreements, beneficiary designations and terms of your will to ensure that your estate is properly transferred to your heirs. Otherwise, mistakes could be made after your death, and your estate won’t be handled in the way you intended.

Step Six: Don’t discuss it with family.

Although you’ll be discussing your estate plan in great detail with your advisors, you should probably avoid this topic of discussion with your family. If you share the details of your plan with family members, you may create false expectations.

Creating and maintaining an estate plan is a lifetime process, and the details may change as your circumstances, goals and plans change. So, don’t make any promises to your family members. Try to reserve estate plan discussions for meetings with your advisors.

Step Seven: Keep accurate records.

Because you’ll need to continually review and update your estate plan, it’s important to maintain current financial records. Hold onto all your estate planning and financial documents and store them in a secure place, such as a fireproof safe.

Keep everything together so that your files can easily be found if anything were to happen to you. You may want to put together an inventory list of your assets and update it every year or so. Keep this list along with your other estate planning records.

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