Life is unpredictable, and a sudden illness can be especially challenging for families.
Whether you’re a stay-at-home parent, a working mom, or caring for elderly loved ones, having a plan in place can make all the difference.
To help avoid financial strain during an illness, there are a few practical steps families should take to protect themselves and their assets.
From deciding to download POA forms to put a power of attorney in place, to setting up a trust, here are the precautions you should take to ensure your family is financially secure.
Understanding the Risks
Illnesses can strike at any time, impacting your ability to work, provide for your family, and maintain your standard of living.
From high medical expenses to lost income, the financial repercussions can be severe.
While some illnesses are short-term, others can lead to chronic conditions that require long-term care.
Recognizing these risks is the first step in building a solid plan that will protect your family.
Health Insurance: Your First Line of Defense
Investing in health insurance is an essential part of safeguarding your finances.
Without adequate coverage, a major illness could quickly deplete your savings. When selecting a health insurance plan, consider the following:
- Coverage Scope: Ensure your plan covers hospitalization, outpatient care, prescription medications, and specialized treatments.
- Premiums and Deductibles: Find a balance between affordable premiums and reasonable deductibles that fit your budget.
- Network of Providers: Confirm that your preferred doctors and healthcare facilities are within the insurance network.
- Supplemental Insurance: Consider additional policies like critical illness insurance, which provides a lump-sum payout upon diagnosis of specific conditions.
Making sure you have health insurance in place for an emergency is a crucial first step in ensuring your family’s financial security.
If you’re not eligible for health insurance, remember that there may still be options available based on your location and finances.
In the USA, for example, Medicare and Medicaid provide coverage for those without health insurance.
In Canada, the universal Medicare program pays for a majority of medical expenses, though some things, such as prescription medication and long-term care, are paid by you.
Creating an Emergency Fund
An emergency fund acts as a financial cushion in case of unexpected medical expenses.
Financial experts recommend that you should have at least three to six months’ worth of living expenses in your emergency fund.
This money should be easily accessible, so consider keeping it in a high-yield savings account or something similar.
And remember, it’s never too late to start an emergency fund if you don’t currently have one! Small amounts saved on a regular basis can add up quickly.
Disability Insurance for Income Protection
If an illness prevents you from working, disability insurance can replace a portion of your income. There are two types of this insurance:
- Short-term Disability Insurance: Provides coverage for a limited period, typically up to six months.
- Long-term Disability Insurance: Offers benefits for extended periods, potentially until retirement age.
Review your employer’s disability insurance policy, or consider purchasing an individual plan if your coverage is inadequate.
Loss of income during an illness can be devastating to your family, which is why disability insurance is so crucial.
Preparing a Will and Estate Plan
Estate planning is essential to protect your family’s financial future in the event of a serious illness or death.
Drafting a will should be an important first step in creating your estate plan. It gives you a chance to clearly define what will happen to your assets if you pass on.
While creating a will can seem daunting, there are a variety of resources and templates available online to help make the job easier.
Next, consider appointing a Power of Attorney, a trusted person that has the authority to manage your financial and legal matters if you’re unable to do so.
This can be especially important if you have minor children, as your POA can help ensure that your legal wishes regarding their care are followed.
Appointing a health care proxy should also be considered if you have specific wishes or concerns regarding your medical care.
Your proxy will have the legal right to make medical decisions on your behalf if you’re unable to do so.
A will ensures that your assets are distributed according to your wishes, while your power of attorney and healthcare proxy ensure your wishes are followed if you become incapacitated.
Focusing on Preventive Healthcare
While there are no guarantees in life, for the most part, the healthier your lifestyle, the lower your risk of developing a serious illness.
Make sure to prioritize your health with a diet rich in fruits, vegetables, whole grains, and lean protein, and try to minimize your intake of salt, sugar, and alcohol.
Similarly, regular exercise can help lower the risk of heart disease, diabetes, osteoporosis, and many other serious diseases.
Finally, regular checkups are essential both for maintaining your current health and for early detection of any potential illnesses or health concerns.
Ensure that you visit your doctor for a checkup at least once a year, and don’t put
Reviewing Your Financial Plan Regularly
Life changes, and that means your financial plan may need to change as well.
Whether you add a new family member or downsize your home, you may need to adjust your will, insurance coverage, and financial plan accordingly.
Regularly review your insurance policies, emergency fund, and estate planning documents to ensure they remain up-to-date and relevant to your current situation.
Leveraging Professional Advice
Consulting with financial advisors, insurance brokers, and legal experts can provide valuable insights and tailored recommendations. Professionals can help you:
- Assess your current financial status.
- Identify potential risks and gaps in your coverage.
- Develop a comprehensive protection plan that aligns with your goals.
- Set up a trust to protect your assets from debtors.
Being proactive about protecting your finances in case of a serious illness is always a good idea, but when you have a family it becomes a necessity.
By ensuring you have the proper insurance coverage, and making sure your financial and legal affairs are in order, you’ll be protecting your loved ones from potential hardship in an emergency.
Implementing these measures today can bring you peace of mind and financial security, even in the face of life’s unpredictability.