Three ways to help build financial protection for your health, income, and legacy

Here’s something you might not expect: preventive coverages are on the decline for Americans. For the past five decades, life insurance trends have shown a steady decline in ownership rates among American adults, with 83% having life insurance coverage in 1975, and 52% in 2023.¹ Americans' lack of disability insurance coverage is down from previous years as well, and the decline is accelerating. The 51% of working adults who have disability coverage dropped 12% from 2018 and 18% from a decade ago, in 2013.²

There may be many reasons for not prioritizing this type of planning: it can be a difficult and emotional subject to broach, it can seem like another thing to add to our busy lives, or maybe it’s just not something that we think about regularly.

It is in our nature to protect ourselves and protect our families in tangible ways, but when it comes to more abstract concerns, like our finances, protecting income, or a debilitating illness, we seem to have a harder time taking action.

Fortunately, there are essential things we can do to plan for the unexpected.

Your health

The concern: Many Americans have health insurance that does not cover all their medical needs, either because the deductibles are too high, or the policies pay for only part of the bill. We can only expect so much from health insurance, and people are rightly worried about becoming ill, both due to the illness and the costs incurred. A quarter of Americans owe $10,000 or more in medical debt, even though half of them have health insurance that’s supposed to minimize excessive health-care costs.³

The options: Fortunately, there are ways you can help protect your finances in the case of a health crisis. There are tax-advantaged savings options, such as a flexible spending account (FSA) or a health savings account (HSA), that help you put aside money in advance to cover certain eligible health care expenses. There are also supplemental insurance options, such as accident, critical illness, cancer, and hospital insurance, that provide you with a lump sum of money depending on what treatments you receive. These various types of insurance may be offered in your employer-provided plan, or privately. All these measures can help protect you, your finances, and your family’s well-being.

Your income

The concern: Without your income, even temporarily, your family could have a hard time paying the bills. Ninety two percent of employees are concerned about being financially prepared if one of their household's primary wage earners should become unable to work due to an illness or injury.³

The options: There are many types of income protection that can help address your unique income situation — and your family. At work, your employer may offer a disability income insurance policy as well as supplemental coverage that helps cover more than just your baseline income. Individual disability insurance policies, available through a financial professional, can be the most long-term and reliable sources to help protect a portion of your income. Policies that are tailored to you and that are independent from the benefits offered through your job can help ensure you’re doing the most to protect your family’s lifestyle and future. If you’re a small business owner, you can buy disability insurance that help protects your company if you can’t work.

Your legacy

The concern: People are not protecting their families as well as they could in the event of a death. Among households that experienced the premature death of a main wage earner, 62% of surviving spouses or partners feel that the loss had either a devastating or major impact on their family's financial situation.⁵ Not only do they have to deal with the loss of a loved one and that person’s income, surviving family members take on obligations such as the cost of burial, outstanding debts, additional child care, and a greater share of mortgage payments. We even see evidence of this in the rise of fundraising sites like GoFundMe, which has a designated “Funerals & Memorials” section.

The options: Life insurance is another form of income protection that can help you support those you care about in the event of your passing. People sometimes avoid adequate coverage because they think it’s too expensive or they’re more worried about saving for retirement than preparing for the financial strain that can occur because of a family member’s death. However, term life policies are surprisingly affordable, and whole life policies can be an effective asset in someone’s overall financial portfolio. In addition to the valuable death benefit, whole life uniquely acts as a financial instrument with living benefits and guaranteed cash value⁶ that can be used for unexpected expenses, tuition or even retirement.⁷

There are many ways you can help protect yourself and your family, by having the necessary insurance. By realizing where the gaps arise, and by talking through some of the possible income protection solutions with a financial professional, you can help ensure that the ones you love will be financially protected.