Insurance: The most critical part of any financial plan

Insurance: The most critical part of any financial plan

There are 3 types of insurance that everyone needs. Life insurance, permanent disability, and critical illness cover. These are not should haves, they are must haves and without them no one’s financial planning is complete. These things only get more important as an individual takes on more responsibility through their life. Critical Illness and Total Permanent Disability cover are perhaps the most important. What would be the impact of being out of work due to illness? And what would you do if a car accident rendered you unable to physically do your job? Whilst no one likes to think it will happen to them, statistically there is a fairly high chance something serious will happen to us all at some point that will take us out of work for a period of time.

Life Insurance

The value of life insurance cannot be overstated. Life insurance not only offers protection for your family and home in the event of your death but can also be used as an invaluable tool in your financial planning. Some people may think of life insurance as just another expense. The question you need to consider is would someone in your life suffer an economic hardship if you were to die?

Total or Permanent Disability (TPD)

Being insured in the instance that an accident leaves you unable to work is essential. No employer is going to keep paying for someone who can no longer perform the function they are being paid to do. Redefining your career due to a change in your situation is also not going to be easy and, in many cases, will be impossible. This could leave you at the mercy of

Critical Illness Cover

Much like TPD but more likely to be claimed against, critical illness cover will pay out in the event that you are diagnosed with an illness that can be critical. The illnesses covered will vary depending on the insurance provider but in most cases, they will cover the most common ones such as cancer. The general rule of thumb is that critical illness cover should cover you for 5 years living expenses at a minimum, with many people increasing this amount to also give a budget toward medical care. With a policy like this in place you could go directly to the best doctors at the best hospitals in the world without worrying about the size of bills that will rack up. This does not replace medical insurance though and is primarily to cover loss of income during your recovery and to unsure you can take the time to recover without financial worry.

Hoxton Capital Management is a borderless, independent financial advisory consultancy.

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