As anyone with kids will testify, becoming a parent turns your life upside down and beyond all the excitement come lots of added responsibilities. The most important of these is life insurance and estate planning i.e. ensuring your will is in order. Of course, life insurance can’t ever replace the death of a loved one, like say car insurance can replace a car, but it can replace the income that was being depended on to keep your kids and loved ones financially secure. As expats, it’s even more important to have a solid policy and plans in place, because you may need some additional flexibility.
Follow our guide to help you get your financial planning in order:
What is life insurance?
Life insurance is like any other type of insurance – car, home, health and so on, in that you pay a monthly premium in the event of something bad or unforeseen happening, in this case a death of an income earner and / or a spouse. With adequate life insurance in place, if you or your spouse dies, you or your children won’t have to deal with financial uncertainty and drastic changes while also dealing with the emotional loss. Your life insurance policy isn’t for you but rather for the people in your life who depend on you.
Why is it so important for parents?
• To protect the future of your kids
If your family depends on your financial support for their livelihood, then life insurance is a must, because it replaces your income when you die. This is especially important for parents of young kids and will need to cater for everything a growing family needs.
• To leave an inheritance
Even if you don’t have any other assets to pass to on, you can create an inheritance by buying a life insurance policy and naming your kids as beneficiaries. This will set your kids up for a solid financial future.
• To settle your debts
In addition to providing income to cover the day-to-day living expenses of your family, a life insurance policy will cover any outstanding debts, like your mortgage, credit cards or car loans.
• To contribute to your expenses
Funeral and burial costs easily add up, especially if there is a body to repatriate ‘home’. You don’t want your spouse or children to be left with any extra financial burden in addition to the emotional burden they’re already suffering.
• For financial security
A life insurance policy can support the big events in your children’s life such as their tertiary education, getting married, buying a home or starting a business.
• For peace of mind
No amount of money can ever replace a person but life insurance can certainly bring peace of mind. It’s one thing you can plan completely and be assured that your kids will be taken care of when you’re gone.
What about a will?
• With every new addition to your family, it’s important for both parents to ensure they have up-to-date wills
• You’ll need to agree on and designate a legal guardian – someone you both choose to raise your kid(s) in the event of an unexpected tragedy
• You may also wish to set up a trust for your child and name trustees separate from your chosen guardian
• Through a trust, you can ensure that your estate is paid out to your child according to your wishes. Among other things, trusts can be used to preserve assets for young kids, manage pooled investments and minimise estate and income taxes
If you take-away just one thing:
None of us know when we’ll die. It could be today, tomorrow or fifty years from now, but it will happen eventually. Adequate financial planning via life insurance and an up to date will protect your children from the unknown and provide them with a safe and secure financial future. You should take immediate steps to ensure you have adequate plans and if you already have a life insurance policy, we recommend you evaluate it annually to ensure it will provide enough to meet your responsibilities.