The importance of protecting your income
Cashflow is King
At certain points of our lives many of us find it necessary to organise life cover or perhaps some critical illness cover (best described as life cover that pays out if you “only die a little”). These events often involve house ownership & / or young children.
However, what happens if we haven’t died or find ourselves unable to register a claim under a critical illness policy?
If you aren’t able to work for a prolonged period (whether this is due to illness or injury) do the bills stop coming? – clearly not!
Short term most of us would hopefully be able to cope however, without:
• a salary
• profit share
the real question is can we still afford the school fees, the mortgage, the supermarket bill etc etc over the longer term. This may also impact on our ability to continue payments into our pension which in turn may reduce cash inflows in retirement. This situation is a recipe for disaster & however unfair can severely damage what would otherwise be an extremely robust financial plan.
Obviously savings can be used but aren’t they intended for other emergencies like the need to replace the car or the central heating boiler or maybe the next holiday?
One solution could be to consider Income Protection Insurance the cost of which naturally reflects a number of factors including:
• your health
• your age
• your occupation
• how much cover you require
If this situation looks familiar, before you do anything else remember the important three stage approach that should always be applied to insurance:
• Do I have a liability?
• Can I genuinely “self insure”
• Which is greater, the premium or the opportunity cost of needing cover but NOT having it?
Subject to your answers do consider transferring the risk elsewhere..............perhaps to an insurance company?