Protect your finances with Insurance

So now that you have accumulated some wealth, get some insurance to make sure you protect it so you don’t lose it!

How do you protect your finances? Mostly it’s a case of ‘spending money to protect your money’.

Have you got these ones covered?

• House and contents – because your house is such a high value asset, you MUST insure your home if you own it [in fact it’s probably required as part of your mortgage]. It’s also useful to insure your furniture and personal belongings – it can cost a lot of money to replace them all if they are destroyed or stolen.

  You can even insure your pets on some policies, to cover you for those huge pet bills when your darling cat or dog gets sick or injured.

• Car and vehicle – any vehicle you own is also a major asset, and would cost you personally to replace in the event of an accident. Insure for damage you may cause to your vehicle and also for damage that your vehicle may cause to other people or property.
• Public liability – because of the increasing cases of litigation, many people are now taking out public liability [often as part of their home cover] to cover the costs of other people suing you for negligence. Of course, you still need to do everything reasonable to ensure you don’t get sued in the first place.
• Salary continuance – most people live from pay packet to pay packet, regardless of how big or small that pay packet is. How would you cope if you suddenly lost your job or couldn’t work due to prolonged illness or disability? Most families can’t cope, so salary insurance is essential, particularly if your are the primary income earner.
• Health – more important in some countries than others, a health policy allows you to receive medical treatment when you need it. It saves you from outlaying huge medical costs if you aren’t covered, and allows you to get treatment when you need it so your career isn’t as affected.
• Life/ death – you obviously won’t care much about this when you’re dead, but will your family cope? If you are the primary income earner (and even if you’re not) it’s satisfying to know you’re your family will be secure financially if you do pass on.
• Funeral Plan – equally important for your grieving family, having a funeral plan will ensure that your family won’t be out of pocket for funeral expenses.
• Last Will and Testament – It is very important to keep your Last Will and Testament up to date and in order – failure to do so may leave your finances and assets tied up for years, leaving your family with nothing. Make sure the process of distributing your assets goes as smoothly as possible.

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Getting the most out of insurance polices

• Shop around – there is often a big difference between policies, even when they offer the same level of coverage. And check this periodically against other insurers as many insurance companies factor your 'age’ into the calculation of the premium. As you get older, insurance premiums may go up or down, so it’s always worth checking again.
• Make the most of multi-cover policies and loyalty programs, but only when they offer you value. Many insurance companies will offer a discount if you have been with them for a certain time (loyalty program) or if you insure several things (car, house, life, etc) with them. This is great if it saves you money, but make sure it really does! A little bit of investigating goes a long way in picking the right insurer.
• Always read your policy – know what’s included and what’s not. There’s nothing worse than making a claim and finding out that you weren’t covered for that particular event. For example, some house policies won’t insure for flooding, if you live in a flood prone area. Some health cover won’t insure for pre-existing conditions. Always read the fine print and be fully informed of what exactly you are covered for.
• Be aware that you still may need to pay an excess for each claim – know what this excess is and allow for it in your ‘rainy day’ budget.
• Make sure you’re insured for the right amount – as time goes by, your house value increases and so do replacement costs for cars, furniture and personal effects. Make sure your insured cover also increases. Many people also under-estimate what their house etc. is really worth, so get it professionally valued from time to time to be sure.
• When making a claim, always be honest about what happened and what you’ve lost – don’t be tempted to ‘get a bit more’ as insurance cheats are punished severely.

There is an insurance record sheet in the ToolBOX, under the section on “Financial Tools” to help you keep track of your insurances.

And don't forget to include all premiums in your budget!

But you can diversify your investments so you don’t have all your eggs in the one basket – if one investment doesn’t perform, hopefully the others can smooth things over.

But as long as you ‘have’ something, there is always a risk of losing it – so be prepared and protect your wealth as best you can and get the most of your cover.

Related Topics:

• Wealth Creation
• Budgeting
• Assets
• Investments