“You and your wife are both in your late 20’s, married for seven years and have a five year old son. Both of you have a combined annual income of $72,000 and your plan is to save at least $250,000 to pay for your son’s tertiary education. You also have a few investments and have estimated that you could reach your goal in about 15 years. You believe that you have the “perfect” financial plan. However, driving home from work one day, you are involved in a tragic car accident and may not be able to work again for years to come. What happens to your “perfect” financial plan? The point here is that, one unexpected event can cause the best financial plan to become completely worthless, if you do not have insurance.”
No one can predict what this New Year will bring and you can’t control the future, but you can take steps to protect your family financially and safeguard the good things in your life with proper financial planning. Besides budgeting carefully and saving more to achieve your goals, having life insurance is one of the key aspects of a solid financial plan. Life insurance adds stability and security to what is often considered a crisis for your loved ones and is an essential part of financial planning.
Regardless of your age or stage in life, making sure you are properly insured against events which could keep you from achieving your goals should be a top priority. Many people overlook this side of planning, and therefore leave themselves and their families exposed to greater risks. Sudden critical illness can also place a financial burden on family members in several ways. The illness may result in long term leave from work which could lower a family’s income. Additionally, the cost of medical expenses adds to the household expenses. However, if you have medical insurance this should cover a larger part of the medical expenses. In the event of an accident, disability insurance can cover lost income from the inability to work and many policies pays up to 10 to 15 times of annual salary after the insured satisfies a waiting period.
This can help pay the bills while you are recovering. In the case of a sudden death, besides the emotional impact of the death of a spouse or bread winner on the surviving family members, the financial impact can also be devastating. The loss of a spouse who financially contributed to the household expenses will impact the family’s future goals, and can create financial hardship. But fortunately, there’s life insurance to help protect against this risk. To determine how much life insurance your household would need, use this simple strategy: Multiply the bread winner’s income by 15 and purchase a policy with an equivalent death benefit for a term that extends until the person insured would presumably retire. Why 15? Because it results in a number that should re-create 75% of the bread winner’s income if the death benefit was conservatively invested to earn 5%. Ensuring that your financial goals are protected against the risk of loss of income due to death, illness or disability is an important part of your financial plan that should not be overlooked.
It’s important to remember that insurance transfers the financial risk of life’s events to an insurance company. A sound insurance strategy can help protect your family from the financial consequences of those events. The insurance decisions you make should be based on your family, age, and economic situation. There are many forms of insurance so there’s no one-size-fits-all policy. Insurance can benefit just about everyone, with different needs at different times of life, and you should definitely reconsider your insurance strategy every time you review your financial plan.
AIA aims to help you find an investment approach that fits your financial goal and risk appetite by combining innovative products with expert advice. AIA understands that each of you have unique financial goals, therefore AIA has designed a line of investment linked plans that offer you smart solutions to satisfy your portfolio needs by delivering consistent performance. Investment linked plans offer you the opportunity to participate in investment opportunities while ensuring you have financial protection through life insurance. You can benefit from investment opportunities in developed and emerging markets, and in different ranges of risk/return profiles.
This advice on family living is made possible with support from