Last month we wrote about the major life events that could prevent you from building a comfortable amount in your pension pot. This month we’re going to focus on the practical steps you can take to help keep things on course.
Have you stopped to consider what would happen to you or your family if you couldn’t work for an extended period? Or, worse still, if you were no longer around to support your family?
The two key things that could prevent you or your family from having enough are:
- Ill health
- Untimely death.
You may have avoided dwelling on these matters. This is understandable, but some careful consideration now could save you and your family stress and heartache, should the worst happen.
With the right planning you can protect yourself from these unfortunate life events threatening your financial situation. Because if you suddenly didn’t have an income, you and your family may end up having to rely on your savings.
Protect yourself from the threat of long-term illness
The biggest health threat for many of us is suffering from some kind of cardiovascular disease.
According to the World Health Organisation (WHO), cardiovascular diseases are responsible for 17.9 million deaths each year, and these include heart attacks and strokes.
While we all understand the lifestyle changes we can make to help reduce the chance of being affected by heart disease, you can also protect your income in case a heart attack or stroke leave you unable to work.
3 things you can use to protect your savings if you’re unable to work
There are two ways you could consider protecting your income or savings if ill health prevents you from being able to earn your income.
Income protection: If you are too unwell to work, income protection will kick in and pay an agreed amount of money each month to cover a large portion of your lost earnings.
There are several important decisions you will need to make when taking out income protection. Things like the amount of income you want to insure and how long you want to defer payments in the event of a claim will affect the cost of your premiums. We can help you understand what level of cover you might need and ensure you get the best protection for the best price.
Critical illness cover (CIC): If you are diagnosed with a critical illness, CIC will pay you a lump sum to help you cover the costs of medical care, cover your mortgage, or help pay for everyday living costs and, perhaps, cover the costs to change careers, as a lifestyle change is often required to lower stress.
Illnesses covered by CIC policies vary between providers but some illness, such as cancer, heart attack, stroke, Alzheimer’s disease and Parkinson’s disease, among others, tend to be covered as standard.
CIC insurance can vary in terms of what critical health issues they protect against, and so it’s wise to get quotes from several providers to ensure you’re getting the right protection at the best price.
Private medical insurance: while it will not cover all the costs if your income stops because of ill health, having private medical insurance would at least mean you didn’t have to dip into your savings to get the treatment you need.
Insurance can vary greatly between providers, but we can work to find the right level of cover for the best price. If you don’t already have private medical insurance through your employer, it can be another useful way to further protect your savings from being eroded if you suddenly face expensive medical bills.
Protect your family in the event of your untimely death
Most people consider life insurance when they get a mortgage, but even if you haven’t got a mortgage, providing your family with a financial cushion in case you die can provide valuable peace of mind.
Life insurance can support your family in the event of your untimely death. It usually enables them to sustain the standard of living you provided for them. For example, it can be put towards paying off a mortgage, replace lost income, or maintain the cost of school fees and provide important continuity for your children.
Life insurance can be held in trust. This way it will fall outside of your estate for Inheritance Tax purposes, which also makes it a useful way to make sure more of your wealth passes on to your beneficiaries without being eroded by significant taxes.
There are different types of life insurance. We can help you find the right policy for your own circumstances and make sure you’re paying the best premium for the right level of cover.
We insure everything, but often forget about protecting our health and life
Many of us will insure our homes, our cars, our possessions, and even our pets, but arranging insurance for our income, health, and life is way down the list, or else gets forgotten about entirely.
The younger you are when you buy protection insurance, the cheaper the premiums will typically be.
So, if you don’t have any form of protection of the kind discussed here, now may be the perfect opportunity to address the problem.
When you have the right protection in place, you should also remember to revisit it occasionally to make sure the level of insurance and the money it will pay out remains in line with your living costs.
Don’t put your savings and future retirement fund in jeopardy when you could act now to protect yourself from the genuine threat of not having enough to fund the lifestyle you desire if you’re no longer able to work. And make sure your family will be able to stay in the family home and maintain their education, lifestyle and basic needs if you’re no longer around and earning the income.
Get in touch
If you haven’t protected your income or savings and want to explore your options, we can help put you on the right track and give you peace of mind.
We specialise in building, managing, and preserving the wealth of Hong Kong’s international community. By creating a personalised, comprehensive financial plan, we can help you realise and achieve your greatest goals in life.
For more information, email email@example.com or call +852 3975 2878.