07/07/2019
In my previous post, we've learnt that protection is the foundation of a financial planning. Now what is the important foundations to have. These are not in a particular order of importance.
1. HEALTH INSURANCE
This is one thing that I can guarantee everyone needs. Here are some of the why's
- Health is Wealth. Literally! For many of us, our best asset is ourselves. If we breakdown, there goes the income too.
- Preventative Care – Neglecting to receive regular checkups will eventually catch up to you. It is a missed opportunity for early diagnosis. Be wise, prioritize your health. Here in AIA, we provide to you a plan that allows you to do medical checkup up to RM300 a year.
- Lack of insurance causes a financial burden for you and your family- One of the causes of bankruptcy in Malaysia is medical bills.
2. AUTO INSURANCE
Thankfully, this one is mandatory. If you can afford a car, then you must insure it. Then again, even your car is insured, why not you? Isn't your life more valuable than your car?
3. LIFE INSURANCE
The best way to visualize this is to think carefully, who will suffer when you die. Although many of us don’t like to think of our mortality this is an important matter to handle as soon as possible. The earlier you get it, the cheaper it is. If you are married, this is important to have. If you have kids, this is a must.
How much Life Insurance?
Normally I would recommend 5 to 10 years or your current income, just to buy time for the people you loved to move on and be financially independent. You can always start with less and increase, but having it is a must.
What type of life insurance?
Term life insurance is ideal. Do not get suckered into whole life insurance. It is better to separate investment and insurance. Invest your money separately and have it under your control. Whole life insurance has a very high premium.
How long should you have life insurance for?
Until you are financially independent, where you family members don't rely on you, until you are clear from all debts. Talk about being an optimist. The reason for life insurance is to make sure your family is secure in your absence. By that time your kids would be old enough to survive on their own. Well, if they are anything like their dad and mom and take their finance seriously.
4. DISABILITY INSURANCE
Similar to the concept above, what will happen if you are unable to work any longer? If you have not reached financial independence, this is the end of your financial journey. Some people are able to pick up a different job or re-purpose themselves, but who are we kidding? Can you predict what kind of disability you are going to have? No. The only way to take control is to know how much you will be entitled to receive if you become disabled.
5. CRITICAL ILLNESS INSURANCE
We've talked about critical illness in my previous post. The amount of expenses you need to prepare for your treatments and recovery period, add up to the expenses, bills and loans that you have to bear with while you are unable to work for a period of time. You do not want to fork up money from your savings right? It's your hard earned money that you can use to expand your wealth.
How much critical illness insurance?
A full recovery from a critical illness takes an average three to five years before you are up and running again. And it may take even longer to find employment. I would advise you to prepare five years of your current income.
6. EMERGENCY INSURANCE
seems like all of my post touch on emergency fund. This is a coincidence. Or is it? Repetition drives the concept into even the hardest skull. Think of emergency fund as a form of insurance too. An emergency fund is extra cash that you set aside for unforeseen circumstances. The recommended emergency fund is 3-6 months of living expenses.
I've covered some of the most important insurance you need to have.
Most of the people I met do not have their personal insurance because they've got company's insuring them. It is always good to take advantage of whatever is offered at your job. However, I advise you to have your personal ones that you can take with you anywhere you go. When and if you leave your job or get fired, you will still have some coverage.
