This is the first aspect of financial planning that needs to be addressed. It is likened to the construction of a building i.e. the foundation needs to be strong before other materials are added.
Most people are open to building their wealth, but when it comes to protecting their wealth, many think that it is unimportant and to some, a waste of time and money. Hence, this aspect of financial planning is often neglected and relegated to a much later time (which could be too late). The failure to recognize that an unforeseen circumstance can wipe out your entire hard-earned savings can potentially have a devastating effect on your financial status.
Do not leave things to chance – the goal is to ensure that you have adequate protection (through the use of appropriate tools) to provide for you, your family and loved ones. I would recommend a balanced and customized approach to risk management.
Life Insurance
Life insurance solutions can help you secure the future of those who matter to you most by shielding them from the financial consequences of your passing. Life insurance is an effective and efficient way to help those you care about to maintain their quality of life, repay debt and fund education in the event of an untimely death. It can also help you build cash value for future goals, such as retirement.
Medical Insurance
Medical (or health) insurance refers to Hospital and Surgical (H&S) plans. H&S plans reimburse the costs incurred during hospitalization. With medical costs escalating each year, it is only prudent to have a comprehensive H&S plan that reduces your financial burden.
The most cost efficient way to get H&S coverage is to use the money from your CPF medisave account without affecting your monthly cash flow. With the introduction of medisave-approved private integrated shield plans, benefits are ‘as charged’ and the scope of treatment costs covered are extensive. If you are in the pink of health, it is best to get the most preferred or comprehensive plan.
Long-term Care
As you approach your golden years, you will treasure your financial independence even more. Hence, it is important and imperative to have a long-term care solution in place as a safeguard. You may need long-term care for an extended period of time at home, in an assisted living facility or at a nursing home. Since this type of care is a likely part of most people’s lives – and a costly one too – you may want to incorporate long-term care insurance into your overall financial plan.
Mortgage Insurance
A property could easily cost a few hundred thousand dollars. It is an investment and a liability at the same time. If you are currently servicing a mortgage loan, it is important that you protect your ability to pay should you suffer an illness or disability. Mortgage insurance is affordable and should be part of your financial planning.
Disability Income
Your income depends on your ability to earn it. If this ability to earn is interrupted by a long-term illness or disability (both of which need not necessarily comply with the insurers’ definitions of critical illness or total and permanent disability), you not only lose your future earnings, your right to claim will also be rejected by the insurer.
A well-rounded financial plan should protect what is important – especially your income. Disability income insurance offers an extra layer of financial protection by providing income replacement in the event of a disabling injury or illness. Many people are not aware of the existence of such protection and hence, miss out on an integral part of their financial planning.
