No one likes to imagine the unimaginable. Yet protecting yourself against worst-case outcomes could make the difference between moving on and melting down. That means having sufficient insurance to care for yourself—and your loved ones.
Insurance may seem complicated, given the vast array of options, and that complexity may lead to underutilization. But in our experience, women tend to underestimate three key areas in particular:
Working inside the home. Many families use life insurance to replace the income from a deceased breadwinner working outside the home. In the event of an untimely death, the thinking goes, those left behind will securely maintain their current lifestyle. But what if your contribution comes from staying home? How will your partner replace the day-to-day activities you currently oversee? Caregiving, driving, children’s programming, and meal planning, just to name a few, will all need to be outsourced—and likely to more than one person. One survey estimates the replacement value of a stay-at-home mom at up to $165,000 per year. Make sure all of your contributions factor into the overall analysis.
The dual lens of long-term care. A 65-year-old woman has a one-in-four chance of living until age 94 (and higher-net-worth women are likely to live even longer). Given this longevity risk, more women than men end up needing help with daily activities in their later years. So it’s no wonder many women contemplate long-term care insurance for themselves. But women often play another role that’s sometimes lost in the shuffle: caring for aging relatives. AARP research suggests that at least 60% of caregivers are female. Purchasing long-term care insurance for other dependents can minimize the disruption in your life, allowing you to stay in the work force or provide much-needed respite from a demanding role.
Disability insurance’s devilish details. Long-term care insurance comes into play towards the end of life, but disability insurance may be needed much sooner. It’s also the one with the finest print. For instance, some carriers won’t insure beyond a specific amount of annual income (typically $250,000), which creates a challenge for highly compensated individuals. Also, many women obtain basic coverage through their employer, but don’t study the policy specifics. The treatment of bonuses and other variable compensation, how taxes factor in, and whether coverage extends to only the same type of work or to any industry are all important criteria worth investigating.
Few women will be lucky enough to go through life without a few stumbles along the way. But with a little forethought—and a willingness to expect the unexpected—you can mind the insurance gap.
1 18th Annual Mom Salary Survey (2018). Source: Salary.com
For more tips on becoming financially engaged, explore Women & Wealth, a new Bernstein podcast series designed to educate, empower, and inspire female investors, and for additional thought leadership, check out the related blogs here.
The views expressed herein do not constitute and should not be considered to be legal or tax advice. Please consult with your legal or tax advisor regarding your specific situation.