Creating a solid financial protection plan

It's important to take measures to protect you and your family from unforeseen events that may put your financial future at risk. Whether it's a natural disaster or an accident, there are steps that can help you safeguard against financial loss with proper protection planning.

Your best bet to ensure you are adequately prepared for unexpected events in the short-term is to create an emergency fund equal to three to six months of living expenses. This will assist you in paying costs that are not covered by insurance, as well as urgent expenses for which insurance policies will later reimburse you.

For long-term protection, a comprehensive insurance plan will help ensure that you're prepared to meet the challenges ahead.

Protecting you and your family

Ask people what their most valuable personal asset is and many will say their health. A serious illness or injury that impairs your health can temporarily or permanently affect your ability to earn an income, and potentially create the need for intensive and expensive nursing care. Adequate health insurance is essential for everyone — it helps protects you whether you need preventive care or acute care due to injury or illness. If you don't have access to an employer-sponsored plan, consider an individual policy.

Along with health insurance, you may want to consider additional insurance protection such as disability insurance and life insurance. These types of insurance coverage can help replace income lost to disability or death for you or your surviving family members. To defray the medical costs of a lengthy rehabilitation or recovery, you may also consider long-term care insurance, which can pick up where regular health insurance leaves off.

Here is a closer look at these types of insurance:

Disability income insurance is provided by a large number of employers in the United States. While many employers offer group disability income insurance coverage, many others do not or employees opt not to enroll. Even if you have enrolled in available group coverage, you may benefit from supplementing your coverage with a personal disability income insurance policy to cover potential plan limitations. Twenty-seven percent of all males and 31% of all females employed in a professional occupation, between the ages of 35 and 65, will experience a disability lasting 90 days or more.¹ Disability can not only result in a loss of income but can also lead to expensive medical bills, modifications to your home or car, and other unplanned expenses. Disability insurance can replace a portion of the income lost (typically 60% – 70%), so you don't have to sell your assets or take other measures to pay your bills.

Life insurance is designed to protect those who matter most to you from financial hardship in the event of your death. It is considered a necessity for parents with young children. Life insurance pays an income-tax-free death benefit directly to your beneficiaries and helps ensure they have adequate funds to meet their living expenses and other future goals, such as college education and retirement.

However, parents with minor children aren't the only ones who benefit from life insurance. Life insurance can also be used to help ensure a surviving spouse or partner can maintain his or her lifestyle after you're gone. Or it may provide funds for the care of a disabled adult child or elderly parent who is dependent upon you for food, shelter and support. It can also provide survivors with the financial resources they need to pay estate taxes, funeral costs and other debts, and can be used to help you meet wealth transfer and legacy planning goals.

Long-term care insurance helps you cover the cost of long-term care when you are unable to care for yourself due to old age, mental or physical illness, or injury. Even before retirement, it may be a good idea to invest in long-term care coverage. Major illnesses such as cancer and heart disease can be debilitating, require long-term rehabilitation and can often develop as people move through their 40s and 50s. Other potentially crippling diseases such as diabetes and multiple sclerosis are becoming more widespread at even younger ages. As a result, more than 40% of Americans receiving long-term care are under age 65.

For those nearing or entering retirement, consider long-term care in your retirement planning. Forty percent of people over age 65 are expected to enter a nursing home, and a significant percentage of retirees will also require home nursing care.3 The average nursing home stay lasts 2½ to 3 years, with average costs totaling close to $200,000 for a private room.4 Of that, Medicare typically pays on average 18% of the costs.5 If you have little or no liquid assets, Medicaid may cover the balance. Long-term care policies, which typically provide benefits starting after 30 to 90 days, can prevent you from depleting a lifetime's savings and becoming dependent on Medicaid.

Protecting your other assets

It is often said after a home fire or car accident that "those are just objects. The most important thing is that no one was hurt." That's unquestionably true. Nevertheless, replacing stolen, damaged or destroyed property can be a financial burden. Auto, home and personal liability insurance policies are designed to help you deal with such burdens. They also help cover your liability or legal responsibility for any injuries and property damage you or your family cause to other people, including related legal expenses. Some homeowner's policies even cover losses as a result of identity theft.

Although the majority of Americans who own vehicles and homes have auto and homeowner's policies::

• Many homeowners are underinsured.This can happen when you neglect to update your coverage to reflect the growing value of your home, improvements to your home or the possessions inside. Also, certain valuable possessions you keep in your house — jewelry, art and memorabilia — will be underinsured unless you request and pay for specific coverage.
• Many renters often lack property insurance on their personal belongings and household goods. A landlord's insurance policy typically pays to repair the building after water damage, fire or other destruction but will not pay for damages to your personal property. It's important to have renter's insurance to help protect your property against fire, theft and vandalism.

Most people can benefit from owning "umbrella" insurance. These policies provide additional coverage for expenses you are responsible to pay that exceed the amount of coverage on your auto, homeowner's or watercraft polices. These include claims that may not be covered on other policies, such as libel or slander; punitive damages you may be responsible for as the result of an at-fault accident; and most jury awards that exceed coverage provided by other insurance polices.

Consult your financial advisor today

To help you identify the right amount and type of insurance to meet your needs, consult with your Ameriprise financial advisor. Your advisor can help you create a protection plan specifically for you and your family, or help update your protection solutions to fit your current situation. If you don't have a financial advisor, contact us at 1-800-AMERIPRISE or search for an advisor in your area.