What would you do if you were to die tomorrow? Would you choose to spend all your wealth, indulge in a feast or devote your remaining time to your loved ones? While death may be a taboo topic in our conservative society, it is however important that we do not neglect it. A part and parcel of life, it is inevitable that we would eventually pass on. Hence, it is important for us to consider the financial consequences and be prepared for any uncertainties.
If today was your last day, are you confident of having sufficient coverage for yourself and your loved ones? Would they be able to cope with the financial obligations and other daily expenses? With our loved ones as our priority, we inevitably worry about their financial health and well-being should anything unfortunate happen to us. Therefore, determining our protection needs can then help us to obtain suitable coverage for any unfortunate events. This could help to ensure that our loved ones are financially protected for any emergencies.
Do also consider your asset distribution for your estate planning. Making a will would allow you to properly allocate your assets in accordance with your wishes. This thus makes it possible for you to set aside separate funds for your children and their future educational needs.
#2 Outstanding Debts and Financial Liabilities
Another important step for estate planning is to determine the size of your outstanding debts and other financial liabilities. This includes any remaining mortgage, car loans and/or credit card debts. Assess if you have sufficient assets to repay these debts. This is because if your debts are more than what your assets can cover, then your demise may result in your loved ones being stressed by an additional financial worry.
Additionally, you may also have incurred a substantial amount of hospital bills and/or other medical expenses. These may have drained your savings and could potentially land your loved ones in debt. Therefore, to prevent the occurrence of such a situation, it is important that you have sufficient health insurance as this allows your insurance to offset your medical bills. Having an emergency fund for rainy days could also protect your family as this would provide them financial security.
#3 The 6-8 Times Rule
Do you have 6-8 times of your annual salary in your savings and/or insurance coverage? With 90% of life-insured Malaysians potentially under insured, many fail to realise the importance of a periodic review. This therefore makes them vulnerable to being underinsured as their coverage may be insufficient for their rising income levels and life stage changes.
As a general rule of thumb, industry standards encourage the protection needs of an individual to be 10 times of his/her annual salary. (https://www.thestar.com.my/news/nation/2018/01/29/are-you-financially-ready-for-2018/ ) This is to ensure that your loved ones have enough for their immediate needs and would not have to worry about the sustainability of their lifestyle.
#4 Amount Required and Your Shortfall
Lastly, recognise the duration required for coverage. For example, you may require a 10-year protection term if you are looking to provide coverage for your mortgage loan. However, if you are planning for the future educational expenses of your child, a longer coverage duration may then be required. Alternatively, use a financial calculator to help you to determine how much you would require and your current shortfall. This could then help to determine the amount necessary to provide your family with adequate coverage should you meet with a mishap.
How FSM INSURANCE can help you get on track
Our team of friendly advisers are able to help you review your financial objectives, long term commitments, and offer you investment and insurance advice specific to your needs. If you would like assistance in reviewing your financial and protection portfolio, or simply to get a quote for an insurance plan, you can contact our advisers at firstname.lastname@example.org.
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