Retirement: Why it's important your financial future

Retirement: Why it's important your financial future

Mr Ghaz, January 4, 2009

Retirement: Why it's important your financial future

Your personal financial plan is incomplete if you haven't protected yourself with insurance. Here are some factors you can look at to help you pick what's best for your needs.

Insurance for life coverage

When faced with so many products to choose from, it's easy to miss the forest for the trees. You need protection, but which kind, and for how much? Take life protection, for example: Have you considered the financial pickle your family would be in, in sudden event of your death or disability? If you have dependents, you need to think about their financial survival.

The main reason for establishing life cover is to provide a lump sum payment to ease the financial burden of those you leave behind. There are no hard and fast rules on how much you should be insured. It depends on your situation. The more your expenses or number of dependents, the more you will need. As the starting point, you should start the coverage at no less than the amount of your outstanding debts.

Then your coverage should be adequate to maintain your family at its current standard of living for a certain number of years. As a rule thumb, you should have life coverage of at least five to ten times your annual income.

The amount of insurance for your outstanding mortgage and children's education funding should be in addition to the amount of insurance for your life coverage. If you already have sizeable retirement or education funds, you will be able to make do with less protection.

There are few major types of life cover you can choose from. A term policy is the simplest. If you die during the plan period, your beneficiary receives the policy value. Its pure life protection and you don't get any cash back when the policy expires.

Basic protection

If you are need one of the growing number of people running your own business, you need protection. Why? First, you could be legally liable and required to pay compensation to injured parties for mishaps that occur on your property. Second, you need to have the peace of mind that your business will survive financially in the event of an unforeseen catastrophic event e.g. a fire. Protection is therefore an essential, rather than optional, business requirement.

What you need is the right level of life and business protection. You have only shortchanging yourself if you take out insufficient cover for your assets and liabilities. By the same token, you don'twant to overpay.

Maximum protection plan

Some of the Life Insurance companies offer a whole life policy coverage plan and it's recommended especially for those who need maximum protection but with affordable premium payments. A good example is the younger generations who have just completed their education and are starting their careers, and want basic insurance protection.

Everyone should have a term plan in their portfolio. A whole life policy will do what it says - protect you for your whole life as long as you keep paying the plan premiums. The company invests some of the premium on your behalf. You can surrender the plan at any point for its cash value, which is related to the accumulated savings. These policies are also relatively in expensive and are well suited for child raising years or while you're paying off a mortgage.

Personal accident protection

Your coverage isn't finished yet. Personal accident protection gives you additional cover for death or serious injuries resulting from accidents, at relatively low cost. The life insurance company notes increased demand for this cover arising from the high rate of road accidents.

These monies will be paid if you die or are dismembered because of an accident. Then there's credit line protection to ensure your outstanding loans or credit card borrowings will be taken care in the worst cases scenario.

If you don' t have this cover, means life policy funds may be needed to settle these debts and this will dilute the amount payable to your dependents. Whereas, the Personal liability cover to the list of policies you should considered. This protects you from unexpected legal cases resulting from your actions.

These are some factors that may help you pick what's best for your needs.