A financial planner will not fail to advise you that getting the right type of insurance is of paramount importance in achieving success in your financial goals in financial planning.
In financial planning, a logical step to improve one’s net worth is to indulge in a careful and a well implemented investment plan. In investment planning, you need to choose the right instruments, with time on your side and also the patience not to touch your investments long enough to allow them to grow through compounding. Understanding that there are always foreseeable risks in any form of investment program, having the right type of insurance is needed to protect your funds is therefore a necessity. The following are the various types of insurance recommended:
1. Term Insurance with TPD (Total Permanent Disability) rider.
“Buy term and invest the difference in a diversified portfolio of long term investment instruments” is the call of most financial planner. The reason for it is that term insurance is the cheapest form of life insurance in the market and the purest form of insurance with “protection” element only without any ”saving” feature built into it and thus provide more protection coverage for a smaller annual premium. This will allow you to stretch your insurance dollars the furthest and to invest the difference in savings and investment vehicles that have higher long term historical returns.. A term insurance policy with a TPD rider will provide pure protection in the event of death and also in the event for total disability.
With the right amount of term insurance in place, you will be able to allow sufficient time for your investment portfolio to mature to achieve your financial goals within the period before the term policy expire.
Life insurance policies with the “endowment” element which are tools for saving are not recommended if the priority is in investing in long term investment instrument.
2. Medical Insurance
A financial plan is not complete without a medical insurance policy with critical illness coverage and hospitalization and surgical (H&S) coverage. A financial plan can be derail if one should suffer the tragedy of succumbing to any life threatening illness such as cancer, diabetes, etc causing the person to lose his job and income before the financial goal of his investment plan materialize. The cost of treatment which may be exorbitant from the hospital expenses and surgery needed would cause you to use up the emergency funds and in the worst scenario may require you to withdraw from investment program before it mature if a medical policy is not purchased.
The quantum of amount of term and medical insurances required will depend on the individual needs and financial dreams of the individual. Indivertibly, getting the right kind of insurances will go a long way in achieving financial goals as the wrong type of insurance can be costly in the long run.