After tumbling down the stairs with my infant in my arms, I was grateful for the financial safety nets we have installed in our lives — even if we didn’t have to use all of them.

I feel pretty stupid for falling down the stairs, but as my dad always says, “that’s why they call it an accident.” I didn’t intend for it to happen, and I couldn’t have predicted or preventing it from happening. That is exactly why we should all have safety nets in place. As we take on more responsibilities in life, it becomes increasingly important to build a safety net that you hope to never have to use.

You may even have some of these tools at your disposal without even knowing it.

What kinds of financial safety nets should spouses or parents have in place?

Health Insurance

I was in rough shape when I landed on the floor, but Baby Stapler seemed fine. He was upset, no doubt, but he didn’t look injured. Regardless, we took him to the pediatrician right away. If we didn’t have health insurance, we might have found ourselves questioning whether it was worth it to take him even though he seemed fine.

The pediatrician did a thorough check-up on him, and declared him fine. I shudder to imagine if he had broken a bone or hit his head and we didn’t detect it until long after he was in pain from the injury.

Employee Assistance Program

After getting the all-clear from the pediatrician, Mr. Stapler called his Employee Assistance Program, which is a benefit many employers have for their employees. Employee Assistance Programs, or “EAPs” vary, but typically include assistance with finding childcare or nursing home care, mental health services for a limited time (they’re not intended to take the place of health insurance coverage), and medical hotlines. He called the medical hotline. The conversation lasted less than a minute.

Mr. Stapler: “My wife hit her head when she fell down the stairs and is wondering if she should go to the doctor.”

Hotline Employee: “She should go to the doctor.”

This occasion was a no-brainer, but the service is particularly useful when your doctor’s or pediatrician’s office is closed and you don’t know whether you should wait until they open in the morning or go to the emergency room instead.

Life Insurance

The doctor gave me a neurological exam. She told me that I passed, but I still shouldn’t sleep for more than two hours or take Advil within the next 24 hours — just in case I started exhibiting signs of a concussion. Then all the “what if”s started swirling around my brain: What if I went to sleep and Mr. Stapler couldn’t wake me up? What if I had smashed my head and died right there on the stairs?

I have some issues with anxiety, clearly.

Despite my anxiety, I think it’s perfectly normal to face your own mortality from time to time. When that happens, I can tell you from personal experience that I have peace of mind knowing that, at the very least, my family would be able to survive financially without me. Term life insurance is so inexpensive for the benefit it provides and the peace of mind it provides even if no one ever uses it.

Mr. Stapler and I each have $750,000 life insurance policies that we bought years ago, independent of our work policies. We chose 30-year term policies with a fixed annual payment.

• Why $750,000? With two young children, we would have a lot of child care to pay for if one of us kicked the bucket in the near future. If both of us were to die, our policies allow us to choose the best guardian for our children regardless of their financial circumstances. Your work might provide you with a life insurance benefit already, so you may want to evaluate whether — and how much — to rely on your employer’s policy before deciding how much insurance to buy.
• Why a term policy? We reason that, by the time it reaches the end of 30 years, we should have enough money in our retirement accounts to cover the expenses of the surviving spouse.
• Why a fixed (or “level”) payment? I’m a cynic and want to protect against the insurance company raising the rates arbitrarily after a few years.
• Why pay annually? If you pay monthly or semi-annually, there is a fee tacked on to each payment. Paying in one lump sum, annually, avoids that fee.

Because we applied in our 20’s and qualified for the best rate possible, we pay $680 for me and $822.50 for Mr. Stapler’s policies. It’s a small price to pay for knowing that our children will be provided for if something happens to us. You won’t know how much you would pay for life insurance until you go through the process, but here is a helpful chart that can give you a good idea of how much money it would cost.

Disability Insurance

“By the way,” I said to my doctor, “do you think my toe is OK?” No, no, it’s not.

She sent me for x-rays and, when they revealed a fracture, to an orthopedist. The orthopedist sentenced me to three weeks in a walking boot and suggested that I walk on it as little as possible. Because I have to park a few blocks from one of my offices, the orthopedist recommended that I work from home if possible. Thankfully, it’s possible.

What it I had a more serious injury, and couldn’t work from home? That’s what makes disability insurance so important. As a freelancer, I’m grateful that we purchased our own disability insurance years ago, and don’t rely on an employer to provide them. There are a lot of options to choose from when buying a disability policy. We have a policy that provides coverage if we can’t work at our “own occupation,” and it kicks in after three months of disability (the waiting period is called an “Elimination Period”). I reviewed these options in a post last year (click here), and discussed whether stay-at-home parents should have disability policies here. However, please note that if you have to file a claim, it’s best to seek help from a life insurance attorney.

Emergency Fund

I have bruises and pulled muscles all over, and my headache only recently disappeared. As a freelancer, I don’t get paid sick time. When I need to take time for myself, we have to dip in to savings or our emergency fund to cover expenses.

The amount of money you should keep in your emergency fund varies by circumstance. Some financial experts recommend six months’ expenses and others suggest $1,000 if you’re also trying to pay off debt. What’s right for you depends not only on the stability of your job and your expenses, but also your comfort level. Some people, regardless of their job stability, feel unsettled without a 6-month cushion.

If you have an Elimination Period in your disability policy, it’s wise to have enough money in your emergency fun to pay your expenses during that Elimination Period.

Where you keep your money also varies on your circumstances. We save our Emergency Fund in our Roth IRAs, which keeps the money far, far away from temptations. You can withdraw your contributions from a Roth IRA, but you don’t really want to. Others rely on savings or checking accounts, and some people prefer to have their emergency fund in cash under their mattress. To each their own! I think it’s more important to have the money or credit access when you need it, even if it’s not earning any interest while collecting dust under your bed.

Health Savings Account

If you have a high deductible health insurance plan, you are eligible for a Health Savings Account, which holds pre-tax dollars for health care spending. Unlike a flex account, the money that you put into your HSA stays there until you spend it. (You have to use the funds in a flex account each year, or else they disappear) You can also invest the money while it sits there, making it a valuable retirement planning tool.

Did I hit on all of the tools that should be woven into your financial safety net? Is there anything on this list that you haven’t yet put in place? 

Image by ponsulak via FreeDigitalPhotos.net