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Have you got it covered?

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A strong financial foundation can protect your family, health and long-term wealth – just don’t rely on your employer to handle this for you. DB residents Jonathan Menzies and David Cooper report.

We are always advising DB residents that the strongest foundation for long-term financial planning is built on protection, an area in our experience that is often overlooked.

When we meet someone for the first time to discuss their protection requirements, we often ascertain that the amount of cover for life, critical illness and health insurance provided by their employer is simply insufficient. DB residents we speak to are understandably shocked when we evaluate their current benefits and discover they don’t come even close to covering their requirements, or the needs of their partner and kids.

However, the good news is that this is easily addressed. And, after all, what is the alternative? Are you willing to risk not having sufficient coverage, when and if you and your family need it?

The big three

The concept of family protection, through life, critical illness and health insurance, is to enable you to maintain your current standard of living (for you and your family) in the event of a death, or a sudden and serious illness. If the unthinkable happens and your earning power is wiped out, or seriously reduced, you and your family will need sufficient insurance to cover all of your ongoing liabilities, such as mortgages, school fees and day-to-day costs.

One of your first priorities is to establish a level of life, critical illness and health cover appropriate to your circumstances. This will ensure both you and your family are wellprotected financially, especially if there has been a recent increase in your outgoings or significant changes in your life, such as a new baby or job.

Addressing these issues will give you peace of mind and an improved sense of security for your family. As a first step, ask a financial advisor to evaluate your existing cover and annual liabilities (including debts/ loans, mortgages/ rental, daily living costs and childcare/ school fees) against your current and future needs. This will show you whether your existing coverage is sufficient.

Life insurance (and wills)

Before your eyes roll at the mere mention of life insurance and you turn the page, bear with us. Appropriate protection should be the first priority for everybody.

In our opinion, the most valuable asset a family can possess is not its properties, cars (or golf carts) and fine wines… it’s you! Yet what value do you place on yourself and your family’s financial wellbeing? Do you have life insurance, and is it sufficient to your family’s needs?

It’s important to recognise that your employer may not have you sufficiently covered. Life insurance may not be included in your employment contract and if it is, it typically covers only three times your basic salary. Bonuses and allowances can be excluded. Check with Human Resources to see how much coverage you have. Is this going to be enough to support your family over the long-term? If not, you will need to supplement the amount with additional life insurance cover.

Of course, it is also important to take the time to write or update your will. None of us like to think about death but when considering British comedian Spike Milligan’s famous epitaph, “I told you I was ill”, it makes sense to take action sooner rather than later.

If you have children, a Deed of Guardianship is an essential document to have in place, in addition to your will. This ensures the local authorities know who you have legally entrusted to look after your children, in the tragic event of both you and your partner passing away at the same time. Do not assume your helper will be legally allowed to look after your children even temporarily – your children will need an authorised guardian.

Critical illness and health insurance

Rising healthcare costs over the past decade have placed an increasing burden on companies to reduce the amount of insurance coverage they give their employees. A solution for many employers has been to cut back on healthcare cover or even remove spousal/ family benefits altogether.

According to the Hong Kong Federation of Insurers, medical expenses for treatment with a private room average at HK$100,626. As a case in point, a client recently stayed overnight in a private hospital for a simple hernia operation and his total bill came to HK$156,000.

This should encourage you to ensure that any medical cover you currently have is comprehensive enough to cover the realistic costs of toptier, private, local medical care.

Email Human Resources and request an up-to-date breakdown of your healthcare cover levels, and while you’re at it enquire about your critical illness insurance. Typically, this crucial type of insurance is capped, or not even provided. Check if you are covered for critical illness by your employer and that the levels are sufficient – at least two years’ gross salary as a minimum.

Again, assuming the coverage provided by your employer is insufficient, you will want to look into additional insurance options.

Boosting your cover

With so many types of private insurance, cover levels and benefits available, the choice can be confusing.

Seeking professional advice locally will not only save you a considerable amount of time but will also enable you to identify the right protection solutions, specific to you and your family’s needs.

Importantly, an independent and licensed financial advisor will provide you with options to address any shortfalls. They will also ensure any new cover complements existing plans you already have in place.

Hindsight is 20/20 but not at the expense of you and your family’s health and financial wellbeing. Address your natural assumption of ‘It’s OK, I’m covered, thanks’ – you can never assume your employer has you and your family fully protected.

Source: DB residents, Jonathan Menzies and David Cooper are senior financial consultants at Platinum Financial Services (www.fsplatinum.com). To arrange a meeting in DB, contact Jonathan on 6747 3871, [email protected]; or David on 5182 9014, [email protected]; or call 3115 7616.

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