The future is unknown, and it is essential to take risks and prepare for them when things do not go as planned. You need to think about what’s important to you, such as your family, lifestyle, and home (rent or mortgage) and make sure they’re protected.
To determine if you need protection and what kind of protection you need, it’s important to look at the big picture.
What savings do you have? Do you have a mortgage or debts to pay? Do you already have insurance products and if so, what do you cover?
Savings as protection
In addition to saving on large purchases or events, it is a good idea to put money aside if you become unemployed or incapacitated. As a general rule, you have enough savings for at least three months to cover your essential expenses. In this way, you have access to an emergency fund, which should keep you afloat in case of problems.
But saving money for three months is not always easy, but sometimes it takes time to develop and burn out quickly. It is therefore advisable to have emergency funds, but you may also consider combining your savings with a type of insurance coverage.
Paying off your debts
Many people have debts, for instance, secured loans such as mortgages or unsecured debts such as a credit card or bank loan. If something happens to you and your income goes down, you still have to pay off your debts, so it’s good to keep them under control.
It is usually logical to prioritise repayment of unsecured debt. Households who lose their main salary often have difficulty making payments.
Some people in this situation turn to credit to cover expenses such as rent or their mortgage and get more in debt. In this sort of situations, most people lost track of their financial obligations. Therefore, it is advisable to consult a wealth management company such as U Account that can help you set out a plan.
The type of insurance policy you need depends on your situation.
A life insurance policy will pay your family members lump-sum or regular payments if you die unexpectedly. If you have a partner or children, a life insurance policy can give you peace of mind that they will be able to get along financially without you.
The income protection insurance should support you financially if you can not work because of illness or injury and your income decreases. This type of policy is especially relevant for people who are self-employed and do not receive sick pay.
You may want to consider buying short-term income protection insurance. This type of policy pays a monthly amount for a period of time if you lose your source of income due to illness, injury or dismissal.