Why an adequate protection base should precede any long-horizon investment commitment.
The Order Of Operations
There is a sequence to building a financial base, and protection sits before growth in it. The reason is not philosophical. A portfolio without adequate cover is one hospitalisation or one lost income away from being liquidated at whatever price the market happens to be offering that week.
What Adequate Looks Like
A frequently cited starting reference for term life cover is ten to fifteen times annual income, adjusted upwards for outstanding home loans and dependants, and downwards for existing assets. For health cover, the relevant question is what a serious hospitalisation costs in your city — a figure that has moved considerably in the last decade.
Keeping Protection And Growth Separate
Products that bundle insurance with investment tend to deliver modest cover and modest returns at the same time. Pure term cover costs a fraction of a bundled premium for the same sum assured, and the difference can go into a separate instrument chosen on its own merits. There are situations where a bundled product fits; they are narrower than the marketing suggests.
One Caveat
Insurance is the subject matter of solicitation. Cover is placed through licensed insurance partners, the contract is between you and the insurer, and the claim decision rests with the insurance company as per policy terms. Read the policy wording, particularly the exclusions and the waiting periods.
