As individuals making our way through life, we encounter all sorts of perils that threaten us with ruin. Grievous evils befall many. While they survive, all they have gathered may be wiped out. The prudent take measures to ensure that they, or those who survive them, can rebuild their lives should disaster strike.
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Each of us needs a full suite of insurance products to mitigate all sorts of risks we face in life. Think of insurance as a suit of armour that protects us from harm arising from different directions. Some pieces of armour protect our arms, some pieces protect our legs. Others protect our head, chest, back and loin. Just as each piece has to take into consideration the protection adequate for that part of the body, each insurance policy has to provide adequate coverage against the perils it covers. Typical coverage recommendations are:
- Health insurance: highest tier covering private hospitals, plus all relevant riders
- Life insurance coverage: 7-10x annual income
- Critical illness coverage: 3-5x annual income
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In the event we are called home early, our loved ones can continue with their lives without having to worry about putting food on the table. Our children can continue with their education and lead economically fruitful lives instead of having to put their plans on hold. If we are incapacitated, our needs are taken care of for the next few years, giving our families enough time to adjust to the new financial circumstances.
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Enhanced Protection
If we were to pause and survey these typical coverage recommendations, we would quickly realise that these parameters are built on generic assumptions. Surely, coverage requirements cannot just be a function of income. Affordability and personal objectives are some of the other considerations that have to feature in your computation of coverage requirements. For that matter, income cannot on its own be an adequate measure. It leaves out retirees, young persons and home makers.
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A well designed suit of armour takes into consideration the pieces required, the thickness of each piece, and how the whole suit comes together to offer optimal protection while not being excessively heavy. Tailoring an insurance suite to suit your unique circumstances requires a more robust conception of insurance.
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That requires an approach that considers your personal financial circumstances holistically.
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For a more refined estimate of your life insurance requirements, check out our Resources section. For a holistic insurance concept you may attend our Workshop, or obtain a copy of The Financial Machine.