It rarely hurts to prepare for the worst, and if you’ve spent many years working hard to raise your family and build up your home, you’ll want to make sure all of this will be protected in the event that something happens to you.
But are the benefits of personal insurance policies really worth the high premiums?
The answer, as ever, is to look at the bigger picture, and consider personal insurance policies in the context of the rest of your assets and investments, bearing in mind how a well-planned insurance policy will increase your financial stability, rather than endangering it.
From balance comes stability
Many financial advisers recommend that life insurance should form part of a balanced financial portfolio that also includes investments and savings, so that the risk of your money being wasted is hedged against the more likely returns of your other financial involvements.
There is also a strong possibility that your savings will grow and your investments will increase their yields in future years, meaning that as you grow older and life insurance premiums increase you will not have to rely so heavily on them to provide for your family in the event that something should happen to you. This should give you greater flexibility in the policy you choose.
For example, you could consider a decreasing life term policy, which is usually designed to pay off your mortgage in the event of your death. The amount of cover decreases over the term of the policy, and the rates tend to be lower – and the more financially secure you and your family become over the course of your life, the less the policy will be needed.
Injury, illness and unemployment
But there’s more to life than death and, although many people now buy life insurance alongside their mortgage, very few think to acquire critical illness cover, even though this is a form of financial protection they are five times more likely to need before the age of 65.
Critical illness insurance pays out as a lump sum, unlike life insurance, which many policyholders prefer to receive as family income benefit, and can be used to reduce financial and other stress during recovery, as well as to cover medical expenses, pay off a mortgage or ease the burden of childcare – all of which would put you in the best possible position to make a full recovery and get your life and finances back on track as quickly as possible.
Income protection and unemployment cover will likewise support you through otherwise stressful times, and increase your financial viability by giving you the time and space to find a new job that improves on the status and income of your previous one, rather than obliging you to compromise your standards simply to keep the money coming in, especially in the current challenging job market.
The benefits of personal insurance policies are far greater than just the prospective payout. As well as the invaluable peace of mind they offer, such policies can help you to protect the rest of your assets and investments against the inevitable challenges life throws in your path.