Everyone wants to save money whenever possible, and there’s no easier way to do so than cutting expenses. Getting rid of unnecessary expenses automatically frees up more money that can be saved or used elsewhere — unless, of course, you make a mistake when deciding what’s an extra and what’s a requirement.
Your insurance policies represent a large chunk of your spending each month or year. Reducing the costs of your insurance, or eliminating some of these policies altogether can save you heaps. However, before you cut your cover to the bare requirements by getting rid of a life insurance policy, make sure you’re not cutting cover you really need. You may be lucky enough to be self-insured, but if not, it’s a case of your money or your life (insurance), and the winner in this match may make you the loser.
Are You Self-Insured?
Not everyone needs life insurance. Some folks are blessed with savings and investments enough to ensure their dependents’ or loved ones’ financial future in the event of their death. However, a bit of money in the bank does not self-insured make, as some investments are more secure than others, and some are more risky. Likewise, your living situation could be the determinant in whether your savings and investments are enough to self-insure.
Where’s Most of Your Money?
If your money is in safe investments, such as term deposits or a Super fund, then you may be good to go. While stock investments can ebb and flow drastically with the economic climate, term deposits offer little risk of losing your money should the economy nosedive. As long as you’re not dipping into the principal for everyday living expenses, term deposits equal to the amount of life insurance you’re carrying can be a safe self-insurance option.
With your Super fund, it’s a bit different. If you’re already retired, have no major debts and few or no dependents, and have let your Super fund contributions remain in the fund or another insured, low-risk investment, then you may be self-insured via Super. However, if you’re years from retirement, and have dependents that are years from self-sufficiency, then you may need life insurance.
Savings and Then Some
Don’t cancel your life insurance policy just yet, though. Just having money in a Super fund or term deposit account is not enough, literally. Should some catastrophe befall you or your family, such as loss of a job, a debilitating accident or illness, or even the loss of a home, would you have enough in your savings to deal with this catastrophe financially and still have enough left over for self-insurance purposes? This is a question best left to the experts; consult a financial adviser before deciding that you have enough in the bank for everything your future may hold.
When you’re eager to cut expenses, don’t cut off your nose to spite your face. Getting rid of that life insurance policy because you assume you’ve got it covered can be a wise way to grow your investments, but only if you truly have your financial future under control. Get some advice first, because it really is your money or your loved ones’ livelihood when it comes to being uninsured.
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