Transferring Risk with Insurance
Insurance is the best tool to have at your disposal in order to protect yourself from exposure to risks that will affect your financial planning future. Even with the best plans in place to grow your wealth, unexpected events can, and do occur.
Preparation is the best strategy for dealing with life-changing events like injury, disability and major illness. Unfortunately, many who fail to prepare for unforeseen events often find themselves at risk of depleting their life savings to cover medical and other expenses.
Insurance is your greatest protection from the adverse effects of unexpected events, as your risk and financial responsibility is transferred to the insurer. There are many kinds of insurance policies available to safeguard your financial well-being, but some of the most important policy types include:
- Term-life insurance – A term-life insurance policy is valid over a certain period of time, usually a term of 10 to 30 years depending on the policy. In the event that an unfortunate event occurs during the duration of the term, your family will be financially cared for with a lump sum payment. This insurance can also cover terminal illness if the individual covered has 12 or less months to live.
- Trauma insurance – A trauma insurance policy compensates you with a lump sum payment in the event that you are diagnosed with an injury or illness that is not pre-existing. Examples include heart attack, stroke and cancer. Trauma insurance can be taken as a stand-alone policy or as part of your life insurance policy.
- Income protection insurance – For many of us, our greatest flow of income comes from our employment. Income protection insurance protects your financial health in the event of an illness, injury or accident that renders you unable to work. If an incident occurs that takes away your ability to work, regular financial benefits will be paid to you following a deferment period.
- Total and permanent disablement insurance – In the event that an unexpected event leaves you totally and permanently disabled, a total and permanent disablement insurance policy will provide you with a lump sum payment to cover your financial obligations and expenses. This amount is useful in covering any outstanding debts, on-going medical expenses and any modification(s) needed for your home.
- Business expenses insurance – If you run a business, you understand the importance of having a good business continuity plan. Part of that plan should include business expense insurance, which will provide you with a monthly payment to assist with the daily operations of your business if total or partial disablement prevents you from running your business.
The insurance policies mentioned are only few of the many policy types available to help protect your wealth in the event of an unexpected, life-altering event. A Certified Financial Planner with certification from Financial Perspectives, Singapore’s only institution offering CFP® certification, can provide detailed information on the insurance options available to you.