Your Simple Financial Plan, Part 7- Be Wise And Manage Risks
Some are simply the best; winning a coveted award, getting an unexpected promotion, opening a wonderful Christmas gift or renewing a great friendship from the past.
Some are the worst- an illness, injury or death of a loved one, the loss of a job or business bankruptcy. No one wants to think about the unthinkable. Force yourself to consider what you and your family would do if an unfortunate, life changing event happened. Would you want to be the man in the photo if there was no safety net below? If you’re a 21 year old star athlete, maybe yes. If you’re a 40 something single mother of three, likely no.
Surprises or no surprises, there’s a lot to be said for peace of mind. Knowing your family will be ok if something bad happens can be a huge comfort. The bigger the risk or fall out from the risk, the more important it is to have protection in place. That’s where insurance comes in.
When you are earning the most or have the biggest responsibilities, you need the most protection. Life insurance is critical when your family is young, your net worth is minimal and your debt is large. Luckily, the costs are usually the most affordable at this stage of life.
Consider the following questions…
1) Have I taken the right steps to protect my dependants if something were to happen to me (or my spouse)- think life, health & disability or income protection insurance
2) Have I taken the right steps to protect my property or other important assets- think home & car insurance
3) Do I have a current will, power of attorney & health care directive in place- in the event of a major illness or death, having these things in place will be a huge benefit for your family at a time of incredible stress.
The best place to start is to review and take advantage of your employer’s benefit programs. Keep in mind that any coverage stops when you are no longer employed. It’s often smart to supplement these plans with some personal coverage outside of the workplace. But, how much do you really need? Not an easy but an important question. Unless you are knowledgable in the field of insurance, it’s often wise to get an independent review before you buy. Banks or insurance company websites have good information to learn about options. Just remember that they would also like to sell you these products so a second opinion makes sense. Play with an insurance calculator like Sun Life’s How Much Life Insurance Do You Really Need? Or, have a look at Moneysense Magazine’s Insurance Made Simple series from 2012.
Risk is like fire: If controlled it will help you; if uncontrolled it will rise up and destroy you. – Theodore Roosevelt
Identify the risks, consider the likelihood of them happening, then manage them in an affordable way. Putting a plan in place to manage catastrophic risks to your family’s well being is the right thing to do. Maybe it’s a New Year’s resolution worth keeping?
Photo courtesy of compassionateleadership.ca