There will always be unexpected circumstances in our life. Whether it’s the loss of a job, loss of a spouse or significant other, or unexpected medical issue, hardship is pretty much a guarantee at one point or another.
Thankfully there are a variety of ways to hedge
Health Insurance
If you live in the United States or another country that does not have universal health coverage, you know that there is always a risk that you will be stuck with high medical bills. We may have the best health care in the world, but we pay dearly for it. Besides the obvious hedge against this risk, namely getting health insurance, there are other things you can do to protect your finances against medical emergencies. If you have the option, consider building up your Health Savings Account (HSA) until it exceeds your out-of-pocket maximum for the year. For example, if the most you will have to pay out of pocket is $3,500, consider regularly contributing to your HSA until you exceed that number. That way no matter what unexpected health care expenses arise you will always have the money in your bank account to pay the bill(s).
Income Protection
Income protection is comparable to disability insurance in that it insures your income if you are unable to work. Almost everyone depends on their income for their bills, savings, investment in the future, etc. If you are unable to work and therefore unable to receive the income you depend on, you can be exposed to numerous financial risks, some of which can be devastating. Income protection takes disability insurance to the next level in that it gives you broad protection of your income; virtually anything that prevents you from working is covered. Most plans cover at least 75% of your income, and the length of coverage can vary depending on the plan you choose.
Life Insurance
I’ve always viewed life insurance as a very morbid topic. Despite that, the importance of life insurance can’t be overstated. When I was in college I worked as a student worker in the library. One of the librarian’s husbands passed away and she had a very difficult time with it. She had to spend a lot of time away from work initially, and a year later she resigned. Losing someone close to you can be devastating. It’s important that those who depend on you for income are taken care of in the case that something happens. Additionally, I think more people should realize that the mourning period can cause someone to be unable to work or force them to end their career. Life insurance is an important hedge against financial risk.
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This is just the tip of the iceberg when it comes to insuring against financial risk. There are countless situations and unexpected events that can lead to financial hardship. Thankfully there are various products out there to help insure against these situations.
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Photo by Jeff Turner
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