4 reasons insurance is an essential part of your financial planning
Insurance may not be the most popular topic at dinner parties these days (it’s probably the least popular), but it’s not something to be overlooked. Insurance is an integral part of any financial plan. Without adequate insurance, you and your family can run into financial difficulties later on in life if disaster strikes. Insurance helps ensure your family is protected when you may not be around.
Still not convinced about the importance of insurance? Here are four reasons why insurance should be an essential part of your financial planning.
Self-insurance isn’t enough
Do you have a rainy day fund? Most financial experts recommend saving three to six months’ living expenses in a high-interest savings account. When you self-insure, you can save money on insurance. For example, since you have emergency savings, you can save money on your monthly insurance premiums by raising your deductible. Also, some insurance policies don’t cover weather-related events like floods, so that’s when self-insurance makes sense.
But while self-insurance helps, it’s often not enough. What if something catastrophic were to happen, like your home is damaged by an ice or wind storm? That’s when you’ll be thankful you have home insurance.
Home insurance protects your most valuable asset
For most people their most valuable asset is the family home. If something costly were to happen to the family home, many would find themselves in financial ruin. That’s why home insurance is so important. Not only does it protect your most valuable asset, imost mortgage lenders require that you have it.
Disability insurance protects your ability to earn a paycheque
Disability insurance is a critical form of insurance, but sadly it’s often overlooked. What if you suffer an injury and are unable to work for an extended period of time? Who will pay the bills? Disability insurance offers you support and peace of mind when you’re unable to work due to sickness or injury.
Find out if your workplace offers disability insurance. You may have it, but it may not be enough, so you might want to top it up with an individual policy. If you’re self-employed, disability insurance is a must, because you’re not covered by a group policy at work.
Insurance protects your loved ones
What if you were to suddenly pass away? Wouldn’t you want to know that your loved ones were taken care of in your absence? Your family will already be grief stricken from your passing. The last thing you want is to add financial worry to their burden.
If you have a spouse and kids, life insurance is a must. The two main types are term and permanent. Life insurance will provide for your family, easing the weight of financial loss.
Critical illness is another form of insurance worth considering. It offers a lump sum payment is you’re diagnosed from a list of illnesses, like heart decease or cancer.
The bottom line is these types of insurance are there for your family when you may not be able to contribute, making them an integral part of any financial plan.