The role of insurance in your financial plan


Insurance plays an important part in financial planning to respond to some of life’s events. It is not everyone who has enough resources put aside to respond to financial turbulences; some people may have to resort to selling assets and borrowing in order to respond to a sickness, accident or even a job loss.

There are various insurance solutions that help protect you and your loved ones in different ways against the economic impact associated with death, illness, disability and material loss or damage. 

Factors to consider when buying insurance

Insurance in most cases is linked to a life event; it can be triggered by a change in your circumstances. The change in marital status; the birth of a child, the purchase of a home, a motor vehicle or even retirement are also life moments that will impact the type of insurance one needs.

Most people require some amount of all forms of insurance; 

Motor insurance

Motor insurance helps protect you from damage to your car and/or from liability for damage or injury caused by you or someone driving your vehicle. It can also help cover expenses you or anyone in your car may incur as a result of an accident with an uninsured motorist.

The cost of motor insurance varies greatly, depending on the company and agent offering it, your choice of coverage and deductible, the make and model of the vehicle, and the ages of drivers in the family.  An older, more experienced driver will more often than not be given a lower premium rate than young driver who just acquired their licence. 

Homeowners insurance

Homeowners insurance allows you to rebuild your home after an event such as fire damage, floods or storm damage and can help cover costs of lawsuits if someone is injured on your property. Life insurance: Your requirements dictate the kind and level of protection

Life insurance, payable when you die, can provide a surviving spouse, children, and other dependents the funds necessary to help maintain their standards of living. The funds could help repay any debt, and also fund education costs of your loved ones when you are gone.

Life insurance policies can be whole of life or term, with whole of life policies covering you until death, and term policies covering you for death, critical illness and or disability for a predetermined period.  Value-accumulating whole life is often offered as death benefit protection with a cash value component that you can borrow against or eventually cash in by surrendering the policy. This means it is a whole of life insurance cover that allows the insured to borrow from wherein the policy is used as collateral.

Term life insurance costs less but will remain in effect only for a specified term of years usually tied to the term of a mortgage. 

Disability insurance: Important protection if you cannot work

A long-term disability policy is activated when you are no longer able to work due to a permanent disability. This insurance will usually pay a specified amount of benefit. This policy is usually taken as an additional benefit on the life policy. 

Health insurance or medical aid

Most people enjoy medical aid insurance as an employee benefit, often with their employers paying all or part of the premiums. It is always beneficial to look at your circumstances and check if you require additional cover. People with a family history of critical illnesses may want to take critical illness policies or add hospital cash back options to their existing policies to reduce the cash burden of such occurrences. 

Credit Insurance

Credit insurance is a type of insurance policy purchased by a borrower that pays off one or more existing debts in the event of a death or disability.

Most Batswana will be familiar with this insurance as it is often what they take up when they obtain loans from banks and other lenders.

This type of insurance is useful as it ensures that the family of the borrower will not be left carless, homeless or with bills to pay in the event your death

Due to the prevailing economic climate, financiers now also require borrowers to obtain retrenchment insurance. Retrenchment insurance may pay off an outstanding debt or pay some instalments for a set period of months. 

*Mosadinkwe Mosinyi is head of Bancassurance, Retail and Business Banking at Barclays Bank Botswana

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