You have read about your Emergency Fund, you started it or you might already have enough stashed away for those times in need. "Surely that's enough" you might think, but why not think further down the line.
What if you're unable to work for much longer than 3 months? What if you're stuck at home for 6 months, a year perhaps. If it was longer than this, would you be able to cope?
As always, it depends on your circumstances. I know a lot of people where this wouldn't be a problem. Granted, they would have to live on one salary and would obviously have to make adjustments to their expenditure but it's definitely possible.
Notice in the above paragraph that I was referring to 'them'. In the majority of couples I know, both of them work. But I don't have that privilege since I am single. Therefore, I have to take out extra insurance. For that, I have Income Protection.
Have you heard of it? Me neither until a few years ago. Only when I bought the house did getting this type of protection made sense but in reality it's important no matter what your circumstance.
Asking the Family for Help
It turns out that you pay extra for Income Protection to kick in immediately but you pay less if it only kicks in after a certain amount of time, say three months. The bank asked if I had family that could support me in the case of not being able to work until the Income Protection kicked in. I said "Yes" but actually, I wouldn't want ask them for help since they do enough for me already. Of course I will ask for help in extreme circumstances but not if I don't have to.
If you do as I have, you should be covered no matter what the circumstance. If for example I was diagnosed with a long term illness - one in which I couldn't work anymore - three things would kick in:
- my emergency fund would keep me going for the first three months
- I would be paid a lump sum from my insurance, to help with medical bills
- my Income Protection would pay me a percentage of my salary from 3 months ongoing until the illness cleared up
As you can see, my plan should work out okay and let's face it, if something were to happen to you, organising and figuring out your finances will probably be the least of your worries. Income Protection is not necessarily for everyone but for me it is pretty much essential, so yes, I do need it.
Do you have Income Protection? Do you have another form of insurance which can help you out in the case of illness? Let us know.