You may believe that you have all the necessary insurance, but many people fail to include the most crucial element. This omission could be dangerous for your personal finances, but Emma Fielding, a licensed financial adviser, offers some sound advice.
Which is strange because your health and the health of those you care about are the most essential things. Nevertheless, this type of insurance is sometimes disregarded. We prefer not to consider the worst-case scenario. Since we are still young, we believe we will never die. We regard dealing with it as a further strain on our already limited time and resources.
But just as you have insurance in case the roof blows off in a sudden storm, it is crucial to examine and put measures in place in case the worst does happen. In the event that our lives crumble, we must safeguard our family and ourselves.
Paying insurance premiums at the moment may seem unaffordable and, to be honest, like a luxury given the cost of living crisis we’re in. To handle feelings of anxiety and stress related to money, however, and to ensure your long-term financial wellbeing, it is essential to have all possibilities covered.
Here are three key suggestions for minimizing life’s “what ifs”:
Create a “solution fund” now.
This is a fund that you set up to help you out in a pinch or to offset a financial shock. For instance, losing your job or incurring unforeseen expenses like house repairs. Your difficulty is resolved by the money. Currently, only 20% of people aged 18 to 24 have enough money saved to cover their essential expenses for three months, while 29% of people aged 35 to 44 have no cash reserve to protect them.
What percentage should you try to save? Aim for a budget of three to six months. This may seem excessive and overwhelming at first, but keep in mind that any amount saved will be helpful in a time of need, so it’s better to have some than none.
Where should this money be stashed away? It’s crucial to maintain these cash in a distinct account from the one you use for daily expenses, yet one that is accessible to you.
You’ll feel less worried and be less likely to incur debt when you have this fund on hand. I like to view of it as money that can be used for insurance that you are purchasing for yourself in the future.
Learn about life insurance; it’s boring but vital.
Life insurance pays out the selected lump sum (tax free) if you pass away within the policy period in exchange for a little monthly payment. It makes sense to take out insurance early because the cost is lower the younger you are. It’s crucial to take into account and provide for the individuals you leave behind. For instance:
- If you and another person had a shared debt, such as a mortgage, your spouse would be responsible for paying off the entire balance of the obligation if you passed away. Although most banks advise you to purchase life insurance when you obtain a mortgage, this is not typically a requirement. But it’s unquestionably a smart move because it would give your partner the money she needs to pay off the debt.
- If you are the primary breadwinner in your family and have small children or dependents, life insurance may be able to pay for the costs of supporting them during their formative years.
Find out from your employer if life insurance is provided as a benefit of employment. It is also referred to as “death in service” insurance and is frequently offered to employees by many firms. The amount of coverage is typically multiples of your income.
Consider what would happen if you became sick (yes, it can happen no matter how frequently you go to the gym).
The purpose of life insurance is to provide financial security for the individuals we leave behind. What if you fall unwell, though? Who will watch out for you? According to the Association of British Insurers, 1 million workers in the UK experience an unplanned inability to work due to an illness or injury each year. Critical sickness insurance and financial security are the two main ways to secure this type of protection.
- If you are found to have one of the serious illnesses listed in the policy, the critical illness insurance pays you a lump sum tax-free. You are free to utilize this money anyway you see fit and may now concentrate on getting well rather than worrying about money. Cancer, heart attacks, and stroke account for 80% of the total claims for critical illness and are the three most often reported illnesses.
2. Income Protection: If you are incapable to work due to a long-term illness or disability, this program will pay you a regular monthly income that is tax-free. It will keep disbursing until you either retire or go back to work. Before you can submit a claim under these plans, there is often a “waiting period” of between three and six months. usually pay between 50% and 60% of your salary, as the payments are tax-free.
Although none of this is particularly upbeat, the security these precautions offer is essential for your family’s protection and your own piece of mind.