In August, as part of our 2024 financial well-being challenge, we turn out attention to wealth protection, the foundation of any financial plan. Without it, any wealth you accumulate is extremely vulnerable. Here’s why you need to protect your life, health, and income and how to do it.
The financial planning pyramid
In case you’re not familiar with it, this is the financial planning pyramid:
The financial planning pyramid is a clear, visual depiction of the different stages of managing your finances. The idea is that you work from the bottom up.
First, you need to build the foundation of the pyramid (in blue): wealth protection. This focuses on three main elements: life, health, and income. If any of these three elements is put in jeopardy, the whole pyramid risks falling, and it can tumble remarkably fast.
Fortunately, solutions exist to prevent this from occurring. These come in the form of different types of protective insurance.
It is only once you have these important defence measures in place that you should work your way up the pyramid, turning your attention to wealth accumulation by saving and investing.
Omitting wealth protection is like leaving your doors unlocked
Just as leaving your home unlocked doors invites intruders, leaving your belongings exposed, and neglecting wealth protection leaves your family vulnerable to financial hardship when unexpected challenges like accidents, illnesses, and other unforeseen life events occur.
These risks can strike at any moment, so it’s essential to ‘lock the door’ by securing comprehensive insurance to safeguard your financial stability and gain peace of mind against potential disasters.
How to protect your wealth
The threats to your wealth come in many guises: a health emergency that involves expensive medical treatment, a long-term illness that takes away your ability to earn, a workplace injury that causes a permanent disability or even a death that leaves a family without a breadwinner.
Unfortunately, no matter how careful you are, you can’t eliminate the risk of any of these things happening. Sometimes life just sucks.
What you can do, is ensure that you have all the essential protection measures in place to limit the financial impact of these nightmarish life events on you and your family.
Protecting your life
According to the Association of British Insurers, 53,105 new life insurance claims were paid out in 2022, with an average payout of £73,578 providing an invaluable lifeline to the dependents of the deceased.
While no one wants to contemplate the possibility of an untimely death, sadly it happens. The proceeds of a life insurance policy will help your loved ones cope financially if the worst were to happen to you.
It’s important to calculate the correct amount of life insurance to ensure that your dependents can pay off outstanding debts, cover their ongoing daily living expenses and avoid having to make major lifestyle changes, especially while bereaved.
The good news is that life insurance is usually relatively inexpensive, although the younger you are the better, which is why we recommend taking out cover early.
Protecting your health
Medical emergencies don’t just affect those who are old, infirm or careless. They can strike at any time. And while we all hope that we will make it to old age with no major health mishaps, many of us don’t.
Whatever your age, however fit you are and however invincible you feel, you could get ill or suffer an accident at any time. Without medical insurance, you may be faced with costly bills to pay out of pocket.
Even if a health disaster doesn’t strike, a comprehensive international health policy offers numerous benefits when it comes to everyday healthcare, including a better choice of health providers, reduced wait times, higher quality medical facilities and excellent preventative care.
Health is wealth – don’t take any risks with yours.
Protecting your income
Have you considered how your family might struggle if your income dried up?
When it comes to financial risk, protecting against income loss due to critical illness is often overlooked, despite being one of the most significant threats to your financial stability.
Critical illness insurance provides a lump sum payment upon the diagnosis of serious medical conditions such as cancer, stroke, heart attack, kidney failure, major organ transplant, multiple sclerosis, deafness, and blindness. The list will vary by policy and insurer.
Cancer is the most common cause of claims on critical illness policies, and unfortunately, the incidence of many cancers is rising among younger people. According to the American Cancer Society, Gen X and Millennials in the US face a higher risk of developing 17 different types of cancer compared to previous generations.
That’s one reason we recommend this type of insurance to complete the triumvirate of protective measures at the foundation of the financial planning pyramid.
The payout from a critical illness policy can be used however the beneficiary chooses—whether for medical bills, rehabilitation, or covering daily expenses during recovery. This financial support can be crucial in helping families stay afloat during challenging times.
Protecting against other risks
Of course, this is not a definitive list of the insurance solutions on offer to protect you financially. We also recommend home, travel, vehicle and business insurance where relevant.
The reason that we have highlighted these, in particular, is that the financial impact of neglecting them can be extremely serious over the long term.
Wealth protection for expatriates in Asia
Here at Infinity, our consultants have helped hundreds of expatriate families protect their wealth with life and critical illness insurance, comprehensive private medical insurance and other forms of insurance coverage. Their in-depth knowledge of the market, partnerships with all the major insurers and understanding of the special considerations for expats, who travel and move frequently, will save you time and money in understanding and fulfilling your insurance needs.
Contact us to talk through your requirements and improve your financial well-being with comprehensive wealth protection today!
A leading provider of expat financial services and wealth management services across Asia.
