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How To Financially Plan Well With The Right Kind Of Insurance

By Edited Nov 13, 2013 0 0

If you are into Financial Planning, you would definitely know that there are many different kind of insurance plans available. Each has its own benefits and its own purposes.

And every individual has their own different needs and concerns therefore it's important to know that not everyone has the same insurance plans catered to them.

So how do you make sure that you got the right insurance for your Financial Planning - this article will share with you the pointers.

Stage 1: Know Your Concerns

You have to understand what are your actual concerns. For most, the area of concerns would include:

  1. Premature Death or Permanent Disability
  2. Hospital Bills or Critical Illnesses
  3. Meeting with an Accident
  4. Not having enough funds to pay for your Child's University Education
  5. Not having enough to last through your Retirement
  6. Protecting their most important Assets against unforeseen circumstances, e.g Protecting Your Home Against Floods

Ask yourself, if you are serious about Financial Planning, what concerns you the most, should any of the above happen to you as of yesterday.

As mentioned, you know your concerns better than anybody else. For most people, their natural instincts would be that they are not afraid of any of the above, but in order to plan well, you have to make yourself go through each scenarios and really ask yourself which would have the most financial impact on you!

Stage 2: Prioritize Your Concerns

Once you know the existence of your concerns, it's time to prioritize them. This is because for any good Financial Planning, it's always hard to take care of every concerns in one planning. Another reason is because you may not have enough budget to take care of all your concerns in an instance.

By prioritizing your concerns, you will be able to address them with your budget. A Good Financial Planning also comes with regular reviews on each area of concerns and the availability of more budget to address concerns that are not taken care of in the first instance and so forth.

Stage 3: Attach An Amount Value To Your Concerns

To make you see that your concerns are really concerns, you would need to attach an amount value to it. How to do so? For example, you have a major concern against not having enough Retirement and you would like to have a monthly expenses of $2,000 that will last you for 20 years.

In simple sense, you would need around $2000 x 12 months x 20 years = $480,000 available at the time of your retirement. Note: you would definitely need more than that because of the existence of inflation. Factor that in and you will need much more!

Therefore your Financial Planning for Retirement would mean that you need to have an insurance plan that will take you from today's planning to achieve the final amount value of $480,000 towards your Retirement Planning.

Stage 4: Understand The Different Type Of Insurance Plans Available

There are many different type of insurance plans available to address different area of concerns.

For example, to address:

  1. Premature Death or Permanent Disability - you will have insurance plans like Term Insurance, Whole Life Insurance or Investment-Linked Plans
  2. Hospital Bills or Critical Illnesses - you will have plans like Hospital Plan that pays a Per-Day Hospital Stay Benefit, a Health Insurance Plan that take cares of the Medical Bills, a Life Insurance that pays a lump sum benefit for diagnosis of Critical Illness
  3. Meeting with an Accident - you will different variations of Accident Plans
  4. Not having enough funds to pay for your Child's University Education - you have the choice to plan with Endowment Plans, Pure Unit Trusts or Investment-Linked Plans
  5. Not having enough to last through your Retirement - you also have the choice to plan with the same planning as per Option #4. There's also the options to include in Investment Properties and Stock Options
  6. Protecting their most important Assets against unforeseen circumstances, e.g Protecting Your Home Against Floods - you have different variations of Home Insurance

If you manage to go through what I have shared above, you will know that there are too many insurance plans available. That's why you need to plan in different stages. That's also why you need to really go through the above two stages.

Once you understand the Insurance Plans that's available to address your concerns - the Features, Benefits, Exclusions, Fees, Charges, Limitations, Expectations and Premium. You are ready to move on to the next stage.

Stage 5: Plan Your Budget, Understand Your Expenses

A sustainable Financial Planning would need you to have a Budget that's available throughout. At Stage 4, you recognize the different Insurance Plans that you would need and the Premiums needed to get started. Your Budget would be used to pay for this Premium.

To plan for your Budget, you would need to understand your daily expenses. If you do have enough budget at the current moment, then understanding your daily expenses would be for the future when you address the next few concerns.

If you do not have enough budget, then understanding your daily expenses will help you to know what are the unnecessary expenses that you can forgo for the sake of a proper and sustainable Financial Planning.

Stage 6: Commit And Review

Once you have your budget ready, it's time to make the commitment into the Plans.

As mentioned, you would need to review your concerns and planning, best on an annual basis or bi-annual basis, to make sure that you are on track towards your financial goals or that your financial concerns are well taken care of.

This review is needed is because your concerns for today may just change tomorrow. Your priorities will also change with time, that's why you need such reviews.

You would also need to stay positive to enjoy the benefits, e.g Retirement Planning or Funding your Child's University Education. The whole planning is a long-term process and it really takes a lot of patience and commitment just to enjoy the benefits at the end.

To be able to stay positive would require you to remind yourself what are you doing all these for. In this manner, you would be able to stay committed.

Now that you know the 6 Stages of A Proper Financial Planning, you can go ahead to plan with the right kind of insurance plans!


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