A key area often overlooked amidst the subject of wealth creation is insurance. While savings and investments are important in the ecosystem upon which financial independence is built, insurance is just as critical an aspect because it is a risk-management tool that is meant to provide security on your journey to making your financial dreams become a reality.

Why insurance?

Your financial plan is the way to secure your future and ensure you manifest your various financial goals, such as owning a house, vehicle, education for your children, retirement, and so on. Your plan must therefore take into account everything that will propel you along a path towards achieving them, and will include the usual suspects: Budgeting, living within your means, paying bills on time, saving for an emergency fund, and of course, investing. But a good insurance policy is a very practical way to make you prepared for unexpected financial bumps you may encounter in the pursuit of these goals, whilst still ensuring that you can in fact achieve them.

What about the emergency fund, you may ask. Yes, an emergency fund can offer this level of protection, but will it be enough? Depending on the stage you’re at in life, in terms of how much you have managed to save, an emergency fund might simply not be enough in the event of a major financial crisis. If you’re a woman in your early thirties who’s just come to the realisation that life does not only consist of living to purchase the next hot outfit, your emergency fund would likely be quite smaller than a woman, say in her forties, or fifties, who’s had more years to build her fund. Always bear in mind that financial crises can happen not only to older investors, but to younger ones, as well.

Insurance matters

There are of course many different types of insurance available — life, health, car, homeowners’, etc — and maybe not all are suited, or even necessary, for you. Carefully assess which ones are. For women with dependents, life insurance is a must in the eventuality you become somehow incapacitated and unable to provide for them. For those looking at long-term investing, health insurance is a necessity in the event that a run-of-the mill doctor’s visit yields news that an extended hospital stay is in the cards for you. In both these instances, wouldn’t you rest easier knowing that a temporary setback does not have to necessarily mean the derailment of your plans for financial well-being? Also, let’s say you’re a casualty of layoffs due to the current economic realities of COVID, and no longer have the benefit of your company paying your premiums, you must find a way to maintain your policy. Did you know that there are insurance policies that will cover your mortgage payments for up to six months in the event of job loss. Can you imagine how comforting this policy was for those who lost their jobs due to COVID-19?

Life happens

There are myriad examples today of people who have fallen on hard times. They’re not mad; they haven’t fallen prey to drugs or alcohol. They may simply have suffered a traumatic job loss and unable to readily find another job. After a few months they were kicked out of their homes because they were unable to pay rent and maintain their financial obligations. COVID-19 has spawned many of these stories: unforeseen crisis, goals all gone up in smoke.

But even before the pandemic there were examples right here at home of people displaced by the vicissitudes of life. A particularly harrowing news report surfaced around last year of an elderly woman who, forced to leave her home, found herself taking shelter at night in the foyer of a local hospital outside of the Corporate Area. Her deep and very real concern was not of the ruptured relationship with her only son who evidently lived in Kingston, but rather of when the hospital authorities would catch on to her little scheme.

While we were not privy to what exactly had gone wrong in her life, it is perhaps safe to say that this nomadic way of life wasn’t something she’d visualised for herself.

But life happens. So many families that you think are financially stable cannot sustain a costly medical diagnosis. Medical expenses can wipe out a nest egg in a matter of weeks.

Insure for the unthinkable

Then there’s the D word: Death, which Jamaicans notoriously don’t like to speak about. But, as we know, two things that are inevitable are death and taxes. What would happen to your loved ones if suddenly you were no longer around to service any debt you might have accrued? How would it make you feel to know you’ve left them burdened with debt they did not incur but are forced to assume?

Nobody likes paying insurance premiums. People tend to view them as a nuisance, cutting into income they can ill afford to lose. I’ve heard people mumble about car insurance policies in particular, about how they’ve paid these premiums for years and have never had an accident, and so have never had occasion to claim on them. But the thing with insurance is, you never need it till you need it. Just ask the beneficiaries of the $16,964,828,345.99 the Jamaican insurance industry paid out in insurance health claims in 2016.

As part of your commitment to building new financial traditions for the new year, make insurance part of your priority.