In one way or another, each and everyone of us is building a house. Not necessarily in the literal sense but rather that we are all working to build something that will bring joy, comfort or security (or maybe all three?) which will give us the sense of accomplishment that we all long for.
Build Your House on the Rock
24 “Everyone then who hears these words of mine and does them will be like a wise man who built his house on the rock. 25 And the rain fell, and the floods came, and the winds blew and beat on that house, but it did not fall, because it had been founded on the rock. 26 And everyone who hears these words of mine and does not do them will be like a foolish man who built his house on the sand. 27 And the rain fell, and the floods came, and the winds blew and beat against that house, and it fell, and great was the fall of it.”
Matthew 7:24-27 – English Standard Version
Ultimately, we should build our life on the sure foundation that is our Lord and Saviour Jesus Christ, but what does it mean it to build one’s financial house? I believe that it is providing security for yourself and your family and ultimately obtaining financial freedom.
In my New Year post I spoke about just a few things we can do to make this year successful. However, one item that should be the foundation of your financial plan if you have dependents is to provide financial security for your family in the various worst-case scenarios. This includes but is not limited to life insurance, income protection and critical illness insurance. Let’s look at each one separately.
A policy which will pay your dependants a lump sum or regular payments if you die unexpectedly.
We are all going to die one day. Some of us sooner than others. It’s pretty grim to think about but it’s a reality that we must face especially if we have a partner, children or any other relatives who depend on us to pay the mortgage or other expenses.
I lost my dad in 2012 and it really was a devastating time. However, my parents had taken out a life insurance policy that paid off the mortgage on the house if either of them died during the term of the mortgage. During that time of loss, money is the last thing on anybody’s mind but the fact that we had one less thing to worry about did provide some relief. If you died tomorrow would your family be financially supported?
I saw a funny tweet from a financial adviser in Africa about why Africans quite often don’t have life insurance. He said that it’s almost impossible to sell life insurance in Africa because he is literally competing against Jesus! Jesus is our ultimate protector but there is wisdom in preparing for all eventualities.
Life insurance is something that we would rather not have to need but if we do eventually need it, we’ll be glad we had it.
A policy designed to support you financially if you can’t work due to illness or injury and your income drops.
A study found that 11 per cent of British people (1 in 9 of us) will be unable to work for six consecutive months or more during their working lives due to illness or injury. Stop and please read that again. But wait… there’s more and that is the fact that the majority of British people have less than three months’ worth of expenses built up in savings to fall back on (our Emergency Fund).
This information alone should have you seriously thinking about income protection.
I have intentionally put income protection before critical illness because income protection will pay out if you are unable to work due to ANY illness or injury, whereas critical illness will only pay out for SPECIFIED illnesses. Critical illness can be useful, as I’ll explain later, but if you don’t read the small print you could be told, ‘I’m sorry but you have the ‘wrong’ type of cancer/stroke/heart attack…’ 😐 For this reason, if I could not afford both policies, I would go with income protection.
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. Be aware that not all conditions are covered and the policy will also state how serious the condition must be.
I know I’ve been a little critical (sorry) of this type of insurance but I just wanted to ensure you are aware of the drawbacks as well as the potential benefits.
This is another insurance policy that has provided support for my family in the past. When my mum was diagnosed with breast cancer a while back, her policy paid out and took pressure off the family, given that my mum was unable to work while undergoing treatment. So, there are definitely situations where this cover is appropriate.
When should you get cover?
If you have a partner, children or relatives who depend on you then you should get cover ASAP! We all know a story about someone who died or got ill very suddenly so we must get out the ‘It will never happen to me mentality.’
Another important reason to get insurance sooner rather than later is because the cost will be cheaper the younger you are. The longer you wait, the more expensive it will become. The illustration below brings this point to life.
There is a lot more detail that I could tell you about insurance but I hope that at very least I have provided you with enough information to understand the importance of getting the appropriate cover.
If you would like to learn more about the insurance options available. Here is a guide from the Money Advice Service.
God bless,
Ten Talents
Great post! I am learning so much already! Thank you.
Thanks for the comment! I’m glad that you find it useful. God bless.
Thank you for this post, very informative
Thank you for the comment Lorrie! I’m glad that it was informative!
Thank you for this thought provoking post, all the more timely and poignant during these unprecedented times.
Thank you so much David. I’m happy that you found it useful.
This is a lot to think about. Very insightful
Thank you very much. I am happy that you found it useful.
Very informative post!!!!. Good work dude.