Protect Your Financial Life: Insure Yourself

   

When we are busy trying to improve our financial situation and our life in general, one thing that usually people forget is that we are human. As human we got sick, sometimes very sick: do we have enough money to cover the medical cost? Do we have enough money to pay those bill when we are not well? Do we have enough money to finance the recovery?  And as human we also will die, sooner or later. And when that’s happen, are we going to be ready ? At least financially ?

Insurance Comes To The Rescue

Luckily, the answer of this problem is really simple:buy life insurance. To be exact, a life insurance that also cover disability and trauma cover. We will never know ever, when we are going to be sick or die. Jokingly said, yes, if you die, it’s no longer your problem but it become your love ones’ big burden. But how about if you ‘just’ become disable or need constant (expensive) treatment, not only you will suffer from your medical condition, you will feel the financial suffering as well.

Protect Your Family With Life Insurance

Imagine for one second what will happen if the primary provider of your family suddenly cannot provide that support any more. Not long, your home under mortgage will be seized by the bank as repayment can no longer be made. Then your family will need to rent out. Your surviving partner may need to take multiple jobs to keep the children at the best school  chosen before. Maybe, they don’t even have extra money to cover your funeral and have to fall into further debt that they cannot afford to pay. Well, you don’t want all of these happen to them, don’t you?

The cost of the insurance is relatively very small with the benefit. Think like it’s the price for your peace of mind. So, life insurance premium is something that you need to add to your budget.

Do Not Under Insure

Insurance is one of those things that you buy but you wish you don’t need to use it. So, when you do need to use it, the worst that could happen is that you under insure. The sum of your life insurance should at least covers:

• All mortgage / homeloan, personal loan and credit card debt (Total the maximum limit, not the current usage).
• Living cost for 6 months for your family based on current budget.
• Sum 2 item above, then add 20% for administrative cost and the unexpected (funeral cost, hiring lawyer / conveyancer, etc)

For example: say you have $300k mortgage, $30k car loan, $20k credit card limit ==> Total $350k. Your household budget is $2500 per month ==> 6 month=$15k. Then you need to take a life insurance that pays ($350k+15k)x120%=$438k. (You may round this up to $450k)

So, the idea is when something happen to you, your family/ spouse can immediately pay off all mortgage / debt / credit card and continue to live at least 6 months without you without financial burden. The hope is during that 6 months, your family/spouse can adjust whatever needed to continue/improve their lifestyle now that at least they are debt free.

On the other side of the coin, you don’t want to have the pay out become too big as you will need to pay higher for the premium monthly/yearly.

Where You Get One ?

I would suggest to always get the free and friendly service of insurance broker. Not only they can compare various insurance provider to get the cheapest cost/premium, but also they can help to make the claim, should you needed to claim one, faster. Yes, they will get residual commission as long as you still hold the insurance, but just like homeloan, you will pay this commission money regardless. (It’s not cheaper to go direct to the company, the person who serve you will get the commission anyway, and you did get to compare the market)

Another factor to consider is that the insurance company need to be good enough and to stay around in the market when you need it later. This is quite hard to judge so your insurance broker might have better idea. Remember: get at least quote from 2 different insurance brokers

What To Do Next ?

Go find an insurance broker, make appointment to review your situation and  get a quote for your insurance above. Then review your budget to make sure you can afford it. If the budget is too tight, you need to find something to slash to incorporate this very important item.  Remember, if you have a debt, you have to have an insurance.

(Before that, maybe you want to read about another important , but optional, protection for your income: “Income Protection: Your Cover In Need“)

Related Posts

• Income Protection: Your Salary Cover In Need
• Rule of Ten: The Least You Can Do
• Taking a mortgage ? Do Not Change Your Lifestyle Dramatically
• A Sweet Revenge: Let The Banks Pay Your Debt
• Debt is Good: Only for Investing & Business Though

Denis Kristanda  

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