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The protection of your wealth is often the more morbid pillar of financial planning to talk about, but as part of a proper financial plan it is absolutely critical that we take it seriously.
The protection of your wealth ultimately looks at 3 categories which are all potential issues in your life:
1) Life insurance – Life insurance or otherwise known as risk cover comprises of various different types of insurance benefits which are there to protect you from the following types of issues : Passing away unexpectedly , becoming temporarily or permanently disabled and then losing your ability to earn an income, being diagnosed with a critical illness such as heart disease or cancer , being retrenched , and business assurance.
The following definition easily explains how a life insurance policy would work:
A life insurance policy is a contract with an insurance company. In exchange for premium payments, the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries upon the insured’s death.
It is important to write down your very own personal balance sheet before deciding on how much insurance you need, get a blank piece of paper and write down your assets and your liabilities and then approach a financial advisor for advice on how much insurance you should have.
2) Hospital expenses – Medical expenses are not to be overlooked! Especially in the private healthcare sector it has become incredibly expensive to undergo treatment or emergency procedures. If you are looking to be covered in the private healthcare networks, you would need an adequate hospital plan or medical aid. It is important to understand the benefits that you have and how much your premium increases are each year, these are all factors that will also affect your budget. If you do not understand your hospital plan or medical aid get in touch with your provider and make sure they explain to you what is covered and not. It is also important to ensure that you have top up cover, otherwise known as gap cover, which would cover the gap in regards to any shortfalls that your hospital plan might not cover (YES, this is a real thing!)
3) Will/Last testament – Having a will is arguably one of the most important things you can do for yourself and your family. Not only can a will legally protect your spouse, children, and assets, it can also spell out exactly how you would like things handled after you have passed on. Contact your bank, financial advisor or lawyer to draft a will.
As we conclude our overview on the protection of your wealth, I urge you to consider why insurance is important, if you spend R1000 to insure your car, but do not want to insure your life for half the price, it’s important that you look at your values and dependents of those around you.
Being protected financially is our first and foremost priority before we go create wealth and invest, there is no point we invest and buy assets but if something happens we are forced to liquidate those in order to pay for our lack of cover. Remember that something can occur and you might not have anyone to look after you, and even if you do, it’s important to consider how the financial burden might affect them with them having to now look after you.