Financial security
In my book, The Money Plan,
I list eight key foundations of financial security.
These are the basics that everyone should consider having in place to safeguard their families’ future. After all, we never know what’s around the corner.
Three of the foundations – an emergency cash reserve to cover three to six months of expenses, a will, and a lasting power of attorney – are essential.
The others are optional but everyone, especially those who are self-employed, should consider the protections they offer for when the unexpected happens.
Life insurance
If you were to pass away, what would happen to your family unit or those you leave behind?
If you’re a single person with no debts, you probably don’t need life insurance.
But if you’re in a relationship or would leave behind someone who would be financially disadvantaged by a loss of income, you should think about taking out life insurance.
There are two broad types of policy to consider: mortgage payment protect insurance and family income benefit.
The first, as the name suggests, will cover the balance of your mortgage. As the balance reduces over time, the policy value reduces accordingly.
This is known as decreasing term assurance and is generally the cheapest way to clear your mortgage in the event of death.
Family income benefit pays out a regular payment each month for the remaining term of the policy, like a tax-free salary.
It can go up in line with inflation but it’s generally a more secure way to protect against loss of income for those you leave behind in the event of death.
Anyone who would leave behind a partner or dependants should consider it.