Don't mess with your insurance

Buy term and invest the rest and you could reap better returns from your investments - so some financial planners tell me. I have a slightly different opinion. Yes, investing in investment link funds or stock related insurance instruments do have it's advantages. We have to understand that the stock market will go up..and will come down...period. As a rule of thumb, investing must be for the long term and it's for a different objective. It is for accumulation of wealth not for protection of the family's well being. During a financial crisis when markets are low, a lot of people will start conserving their cash and also sometimes tempted to liquidate their investments. Stay calm, the market will recover in its natural course. More importantly don't mess with your insurance.

Having traditional insurance or endowments plans allows one to use the cash values to pay for premiums, a term commonly use is "premium holiday". It is logical to do this as these plans are usually more expensive (can easily be triple what you pay for a term plan) and since you want to conserve the cash that you have, you may opt for a premium holiday.

However, having a term insurance with normally lower premium means higher cover, so during financial crisis what do you do? Well, there are various options. During this times, I usually find that people are more willing to surrender their insurance plans as compared to selling their car. Why, because you need the car for your various use. If using a car is for the purpose of transport, there are plenty of options to go by...sell the beemer and get a kelisa for example. To me, the answer is just in our ego. This is just a temporary setback...that's life. Surrendering the insurance plan should be the last thing on your mind. It's during times likes these that we are under more pressure and stress. Ensuring that your risk is well managed is probably the best thing you can do, so that you have that peace of mind while going out in the market and sourcing out opportunities.

The point is, is your financial plan only good for sunny days? Can it withstand the storms in your life? Remember, our financial goals will only be realized in 20 to 30 years time. During this period, the financial landscape will be ever changing. Boom times and sunny days will come, so will recessions and stormy days. In financial planning, the mistake that most people make is to assume that the sun will always be shining. Unfortunately, life is full of ups and downs.

As important as it is to invest your money efficiently, it is also crucial that you set aside part of your resources for the right insurance plan so that when the storm comes, you will not be swept away.