We know that life is unpredictable and sometimes “stuff happens” that can lead to a financial loss.
Of course some losses are small and others can be huge, so are you covered?
How Bigger Loss Can You Cope With?
If you work as a hairdresser and break a comb then the financial impact is tiny and therefore you can copy with the minimal financial loss.
However, if you went blind and could not ever work again then the financial impact is huge … most of us would not be able to cope on our own with a loss like that.
So how do you protect yourself and your family against “bad stuff” happening?
First – Work Out What You Can Afford To Lose
The first step to any risk management is to work out the level of risk that you can afford, or better put what you can afford to lose.
This will typically be based on your income and financial commitments.
Income – how do you get paid? Do you need to ‘work’ for your income and therefore will your income stop if you are unable to work? Most people earn an income from doing work and therefore if the work is not able to be done then the income stops.
Paying to live – we all need money to live, but each of our situations vary. In New Zealand we are lucky to have a Welfare State that will provide some basic living costs, but typically they will provide a mere existence.
Paying your debts – if you have a home loan or other debts then you have a financial commitment that needs to be met. Failure to be able to meet your debt repayments can have serious consequences and lead to your home or other assets being taken away from you and sold to pay off the debts.
Insurance Transfer The Risk
Having insurance for anything is about transferring those financial risks that you cannot afford to or want to live with.
House insurance – this pays to rebuild or replace your house.
Car Insurance – this pays to rebuild or replace your car.
Health Insurance – this pays for your healthcare costs.
Income Protection Insurance – this provides replacement income.
There are a number of different insurances and they are all designed to cover a risk.
The cost is directly linked to the likelihood and cost of claims. This is why health insurance gets more expensive as you get older.
Mortgage advisers will tell you to sort out house insurance, but also make sure your mortgage is covered so you do not risk losing the family home.
Stuff Happens … Talk To An Adviser Before It Does
Insurance provides financial compensation in the event of an insured event happening.
Make sure you speak to an insurance adviser and review what cover you have and more importantly make sure you are covered where needed.
