Long term risk is coverage for the parts of your life you don’t need to insure but could still be catastrophic to your financial plan and your overall well being. This would be your supplemental coverage, disability, life, and annuities.  Life and annuities require a deeper dive so we won’t be covering them this week.

So let’s first look at supplemental insurance.  This is the type of insurance that kicks in when you exhaust the limits of your insurance.  Some of this exists in the form of endorsement (an add on to an existing policy) like having 125% increased replacement cost incase the cost to replace your house is greater than the amount you carry.  But when talking about your home or auto there’s a limit of how much it can cost.  Liability on the other hand is almost limitless with the amount of damage that can be caused to others and then legal fees.  This is where umbrella coverage comes in.  It covers you when you have exhausted the limits of your insurance and usually comes in denominations of $1 million usually for only about $10 a month.  It’s rare that this coverage is enacted but when it does it will save you from going millions of dollars in debt.

Finally when you are unable to work because of accidents, medical treatment or disability, your disability insurance from work will not be enough if it even enacts.  You will need your own to be able to maintain your cashflow in this time of need. And there are laws being put in place now in states like Washington that will soon require Long Term Disability to lessen the strain on government services.

These coverages are enacted less frequently than home and auto but are still essential to building a cohesive financial plan that protects you from a catastrophic accident.