We’ve talked about the different types of insurance cover available to you, so now you need to pick the right one. And remember, your situation might change, so make sure you review your cover regularly.
Prioritise Your Needs and Find a Balance
When you look into the cover you might like to have and then price it up, either by seeking advice from someone like LifeSearch or seeing an adviser or using a comparison website, then it may be the case that the cost is more than you’d like to pay. If that’s true, then you’re going to need to prioritise.
Generally, life insurance comes first. That’s particularly true if you have debt – it would be good to have the debt paid off if you die. If you have dependents, you may want to provide more money for them than just paying off the debts you owe. They’ll lose your income remember, and some provision for that would be good.
Next in the priority list is income protection. I’ve talked before about the power of your income to build wealth. The chances are you’re going to be alive not dead, and if you can’t work that will not be pleasant. So, if you’re single, income protection is likely to be your highest priority, plus maybe some life insurance to clear any debts.
Finally, you might want to consider critical illness cover. As I’ve said, it can be expensive, so rather than provide for, say, all your mortgage to be paid off, you could provide a smaller amount to increase your cash buffer if you do get a nasty diagnosis. It’ll help reduce the burden on your emergency fund and any income protection cover you have.
An adviser like LifeSearch can really come into their own here, helping you to prioritise and balance cost with cover in a way which works for your unique circumstances.
Review Regularly
Eventually, you will come up with a programme of wealth protection which meets your needs and is within budget. You can tick it off your list and call it a job well done, getting on with your life.
While that’s true, you also need to keep your wealth protection programme under review. This needn’t be onerous. I suggest that once a year you make a date in your calendar to review your finances generally. The best example of this came from my brilliant interview with JL Collins, author of The Simple Path to Wealth. His annual day for reviewing his finances is his wife’s birthday, I kid you not.
Whatever day you choose, put it in your diary and review things generally. When it comes to your wealth protection, you want to be quickly revisit the process we’ve gone through over the past few blogs.
Double check your current provision – has it changed? If you’ve had a pay rise, your work benefits will have increased. If you’ve moved jobs they may have changed altogether. If you’ve paid off your mortgage or other debt, you may not need the level of cover that you have currently. If you’ve moved house and taken on a bigger mortgage, you might need more.
It’ll be a less strenuous process than the first time you do it, but it’s definitely worth doing. I talk a lot about being intentional on the podcast, and this is a great example. Rather than letting your wealth protection programme drift and not looking at it for ten years, you’re staying on top of things, always making sure the programme you have is fit for purpose.
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