Prioritising initial insurance policies

Question: I have a new job that now allows me to budget for insurance cover. I believe it is important to have insurance for myself and the family. However there are many insurance policies available. How do I narrow down the key areas that I need to initially consider?

Answer: Insurance, like banking, promotes savings and investments.

By paying regular premiums into an insurance policy, the policy will pay out, dependent on what type of policy and cover is selected, in the event of you having an accident or worst still, dying, when payment would go to your loved ones. Speaking with a fin-ancial adviser will clarify for you the types of policies available and the best ways to invest your funds with a vehicle designed to meet your requirements.

Life insurance is the foundation stone of any financial plan, since you have a family and dependents to consider. You should try to have the right policy in place as quickly as possible. Everybody's circumstances are different, so determining how much insurance cover you need depends on a range of factors, including your income, the specific needs of your family, any debts, and your family's lifestyle.

Another consideration would be to include critical illness.

If you are investing for the first time, you should always evaluate your financial situation. An investment portfolio can only ever be as strong as its financial base, so look at your current income and assets and calculate what your debts and liabilities are. You also need to examine the proportion of your income that you are able to save each month. Spreading investments - property, stocks - is generally the right approach for the first-time investor.

Property

If you are buying a property, home owners' insurance is important to cover both your home and its contents. It is important that your home is insured for the actual replacement cost, that is the cost of demolishing and rebuilding the house together with replacing the contents at full replacement value, rather than just insuring the market value of the house.

Even if you are renting, an insurance policy helps to protect your household possessions such as furniture, clothes and electronic goods. Your landlord probably has insured the building against fire, theft, flooding or vandalism; however, the landlord is not liable to replace your possessions should anything happen - this would be covered under your home contents insurance policy.

If you own a vehicle, you must definitely have insurance for it as this is mandatory in the UAE and most other parts of the world.

Comprehensive vehicle insurance is generally the preferable option as it protects you and covers any liabilities a passenger in your car can claim in case of an accident.

Another key cover you want to look at for both yourself and your family is health insurance. If you do not receive employee health insurance, look at finding a policy that covers both yourself and your family - sometimes this cover is split into two policies. Look at where geographically your cover is applicable and what network of hospitals is included and the required level of cover that is provided. You should also look at any exclusions within the policy.

All these decisions are much easier to make when planning ahead, rather than when they have a direct and immediate bearing on your life. Visit a fin-ancial adviser who can help you decide what immediate policies you require and how to select appropriate cover that fits both your budget and your requirements now and in the future.

- Nigel Watson is sales and marketing director at Nexus, a leading financial adviser.

Views expressed are the author's own and does not necessarily reflect the views of Gulf News. if you have any questions, email at: advice@gulfnews.com