Personal Financial Planning For Your Insurance

2021 certainly showed us how important insurance is. More specifically, life insurance and health insurance are absolute must-haves in your financial portfolio. But sometimes, irrespective of whether you have an insurance cover or not, there may be many areas in which your insurance coverage may be falling short of what you need.

That's why this year is a great time to revisit your insurance situation and do the things you need to do in order to make sure you and your loved ones are sufficiently protected.

If you're wondering where to begin, you're in the right place. Here are some essential ideas that you can incorporate in your financial plan this year, so you have all the insurance coverage you need.

We're going to take a look at three ideas, based on your existing insurance coverage.

Scenario 1: You Have No Life Insurance

If you have no life insurance cover in place, you may be significantly unprepared for any financial emergencies that may occur in the future. Life can be very uncertain, and if anything untoward were to happen to you, it could leave your family with little to no financial support to rely on during very trying times.

This is particularly true if you are the only earning member or the primary earning member of your family. You need to invest in a life insurance plan right away, so in case of any unexpected mishap, your loved ones will have the insurance payouts to rely on for their everyday needs and for their major and minor life goals. You can then rest assured that even in your absence, your family is well-protected financially.

So, to sum it up, here's what your financial plan should be in this scenario.

I resolve to purchase a life insurance cover to protect my family's future financially.

Scenario 2: You Have A Life Insurance Cover, But Suspect It May Not Be Enough For You

Do you already have a life insurance cover? Well, first of all, congratulations! You've already taken the first step towards ensuring the financial safety of your loved ones.

But then, you also need to take a look at another important question. Is your life insurance cover enough? That may not be an easy question to answer right away. But let's first take a look at what your life insurance plan should be able to cover.

• Your family's everyday expenses
  The first thing your life cover should be able to take care of is your family's daily needs. In case something untoward were to happen to you, your insurance payouts should be able to help your family pay for their everyday expenses. This is why experts recommend that your life cover should be at least 10 times your annual income.

• Your family's life goals
  Your life cover should also help pay for your family's major life goals. This includes the cost of your children's higher education, their wedding, their dream home and so much more. It also includes any debts and liabilities that may be in your name, so they don't have to be burdened by the repayments.

• Inflation
  This is a key area that many people overlook when they calculate the right amount of life cover they need. Your family's expenses today may be a certain amount, but a few years down the line, even with the same needs, the costs could definitely go up on account of inflation. If your life cover does not factor this in, your family will find it tough to maintain their standard of living in your absence.

• Emergency situations
  A life insurance plan not only covers the death of the insured person. It can also be modified to cover emergency situations like a critical illness diagnosis, an accidental disability, or an unexpected hospitalization. To be more specific, life insurance riders offer coverage for these kinds of specific needs. You also need to check if you need coverage for these possibilities and enhance your insurance plan with the relevant riders.

I resolve to review my existing life insurance coverage and increase it to meet my needs and my family's future requirements.

Scenario 3: You Have A Life Insurance Cover, And You Know It Is Enough To Meet Your Needs

So, you already have a life insurance cover, and having reviewed all the scenarios in the above section, you've realized that it is enough to meet all your needs and your family's requirements? In that case, kudos to you! Because you've done everything right and your life cover is equipped to give you everything you need from it.

Now, you just need to do one thing - ensure that you pay your premium on time. If there is a delay in your premiums payments, you can still catch up and pay the amount due before the expiry of the grace period. But failing to pay your premium even during the grace period will lead to your policy lapsing. And this means all the benefits that your life cover offers will no longer be valid.

So, to sum it up, here's what your approach should be in this scenario.

I resolve to pay my premiums on time, so my existing life insurance coverage remains valid and in place to protect my family's future.

Conclusion

So, you already have a life insurance cover, and having reviewed all the scenarios in the above section, you've realized that it is enough to meet all your needs and your family's requirements? In that case, kudos to you! Because you've done everything right and your life cover is equipped to give you everything you need from it.

See how easy it is to customize your financial plan to your own unique insurance situation? That's the thing about personal finance and money management. Once you find out what works for you, it becomes extremely easy to manage your finances and your insurance coverage. So, based on which scenario matches your current situation, remember to adopt the right approach and include the right strategies for your insurance coverage this year.

Read next: Financial lessons 2021 taught us about insurance

So, are you ready to take on this year, with your new financial plan about insurance and financial protection? While you're at it, why not take a look at our blog that gives you a detailed look at the lessons 2021 taught us about insurance? This can help you make smarter decisions this year.