2009 was a very stressful year in our country.  The unemployment rate is in the double digits, housing foreclosures are everywhere and the economy in the tank.

Most people are doing what they can to trim costs. Reducing luxury items and vacations and going back to their roots.  What do we really need? What could we live without?

I talk to people on a regular basis about covering their income with disability insurance. Most people realize that they need to protect their income. The biggest obstacle is usually the cost.

What most people don’t realize is that part of the reason that the economy tanked was that people didn’t have enough money in savings. When they were laid off from their jobs, they had no reserves to pay their mortgage and bills. And the cycle continued.

However, even if the economy was in great shape and you have a stable career, you, too, are at risk of losing your income to a sickness or injury.  The same ramifications would occur if you didn’t properly insure your income.

So the conundrum is that you can’t afford to insure your income, but you can’t afford not to.  If you can’t afford the premiums, you certainly couldn’t afford to lose your income.

There are many ways you can try to reduce your premiums so you can still insure yourself:

Ask yourself how much income you would need (after taxes) to pay for your necessities. Is there anything you would be willing to cut out? Reducing your monthly benefit would significantly reduce your cost.

• Consider a transitional occupation or reasonable occupation definition of disability. These policies may reduce the premiums and, depending on your circumstances, may be sufficient for your needs. With a transitional occupation definition, you are still covering 100% of your pre tax income.
• Shorten your benefit period. The average disability lasts approximately 3.2 years. Consider a 5 year benefit period. Especially if you are over age 45 and have other assets available.
• Remove riders. The cost of living rider tends to be expensive and is intended for long term disabilities as it doesn’t start until after the first year of claim.
• Shop around. Rates vary from company to company and it is important to look at all of your options.

The most important lesson is to prioritize your budget. Ask yourself what is most important to you? Could you live without your income? If you can’t afford to live without your income, it is worth insuring.