Disability, life and long-term care insurance provide reassurance
Farmers are quick to protect against the risks that could jeopardize their bottom line, but few think about the consequences if something happens to them. In the event of an accident, could your farm survive?
Securing his farm’s future is top of mind for Iowa farmer Chris Barron. To guarantee that happens, he makes sure more than one employee is competent enough to keep the various aspects of the operation going should those in management suffer an injury or even worse.
"I don’t want to be the only one who knows how to do what I do," Barron says of the farm’s record-keeping procedures.
Most people assume they are invincible, but leaving a legacy requires strategic, big-picture planning—and preparing for the worst, explains Farm Journal succession expert Kevin Spafford. Employing a capable workforce and protecting the financial side of the operation with adequate insurance are keys to longevity.
Spafford recommends that farm families consider purchasing three types of insurance: disability, life and long-term care.
Disability insurance. An important piece of a farm’s financial security plan is ensuring that needs are met if the breadwinner is injured and cannot work.
"Farmers are often surprised by an initial price quote for disability insurance," Spafford says. "They should weigh the cost of coverage against the probability of loss and the support necessary to maintain the family’s financial security."
When searching for the policy that is right for you, Spafford emphasizes, it is important to know how much money it takes to support your family. To calculate your pretax income needs, add your required monthly income to any other additional needs (bills that aren’t monthly but have a real cost, such as taxes, car maintenance, etc.).
To determine your income during disability, add together your disability insurance benefits, your salary, your spouse’s salary, investment income and any other income.
To calculate monthly coverage excess or deficiency, subtract your total pretax income needs from your income during disability. Once your needs are calculated, seek coverage from an insurance provider.
Life insurance. A death can jeopardize financial well-being and the future of the farm. That’s where life insurance comes into play—it is designed to provide money when it is needed the most.
According to a study by the Life Insurance Marketing and Research Association, more than 6 million households in America do not have a life insurance policy. As a result, 22% will have immediate trouble with daily expenses if the primary wage earner dies, and 26% will be able to meet financial needs for only a few months.
To determine how much life insurance coverage is necessary, consider these five key areas:
- Legacy Project 2012 Report