If you’re like most people, you’ll want to do everything in your power to avoid becoming ill in the first place – but what if something happens anyway?
Both illness and disability can mean a loss of income and a reduction in your standard of living. To ensure that you still have the money you need to live comfortably during these difficult times, it’s important to have a plan to protect your finances.
In this guide, we’ll outline some of the steps you can take to ensure that you’re well-prepared for whatever may come your way. Let’s dive in!
Take out family income protection insurance
There are a number of different policies available that can help provide life insurance cover while you’re unable to work. Family income protection (FIP) is one option that can guarantee financial security for your loved ones in the event that you become ill or disabled.
FIP policies offer ongoing coverage to your family during such difficult times; the best part is that they don’t have to be expensive. In fact, most of these plans typically have lower premiums than standard life insurance policies.
This type of cover will pay out a fixed monthly sum in the event that you can no longer work due to illness or disability.
When selecting a family income protection policy, be sure to take into consideration a few key things, including:
The coverage period and the premiums
Most policies provide cover for up to 12 months, although some offer more extended coverage. Premiums typically vary depending on the age of the policyholder and the level of coverage chosen, but tend to be cheaper for younger individuals.
Review the benefits provided
It’s also important to review any benefits the policy may offer, such as access to medical care or financial assistance during incapacity.
Don’t forget to read the fine print
Insurance policies often have exclusions that prevent them from paying benefits in certain circumstances, such as suicide or murder, so it is essential to read the terms and conditions carefully before taking out a policy.
Set up an emergency fund
If you’re someone who relies on your income to support yourself and your family, you know that having an emergency fund is crucial. This fund can help you cover unexpected costs, like a medical bill or a car repair, in the event that something unexpected comes up.
Before setting up an emergency fund, take note of the following:
- Make sure it’s sizable enough to cover at least six months’ worth of expenses
- Assess your individual needs and determine how much money you need to cover short- and long-term debts, funeral costs and other emergencies.
- Create a funding plan by designating specific rainy day funds for various categories (e.g., vehicle repairs, mortgage payment, insurance deductible), so that you’re always aware of where your money is going.
- Creating and sticking to a decent emergency fund will go a long way in reducing the stressors associated with sudden financial setbacks. If something unexpected does happen, having access to some cash will help reduce stress levels and hasten the process of getting back on track financially.
Chase manageable debts first
If your illness or disability limits your ability to work, ensure that all your key debts are paid ahead of time. This is so that you don’t become overwhelmed when sick leave starts rolling in and income diminishes substantially due to missed wages/employment hours, etc.
While at it, focus on reducing your overall debt load by aggressively working to pay off high-interest debts and bills first. This will help you conserve money and protect your long-term finances.
Talk to a financial planner
Having someone who can help guide and support your decisions as you undergo this difficult time can be immensely helpful in managing your finances responsibly. An experienced financial planner can help create a strategy for funding long-term expenses like health care, disability insurance, and retirement while also smoothing out any bumps in the road along the way.
If the situation with your finances becomes too difficult and you do not see any resolution in sight, declaring bankruptcy may be an option for you. While this is not always the best solution, it can often help prevent creditors from taking extreme measures like garnishing your wages or pursuing other legal action against you.
No one wants to contemplate becoming ill or disabled, but unfortunately, it can happen to all of us at some point in life. This explains why it’s important to have a plan in place should that unfortunate event occur.
By following these tips, you can be confident that you and your loved ones are taking the necessary steps to safeguard your financial future. Good luck!