Planning ahead could insure you

In this savings column, I have previously written about the need for putting aside money for the future, but even the most sensible financial planning can't possibly prepare for a serious illness or loss of life.

And the statistics are scary. A total of 52 per cent of all working Britons do not have sufficient savings to support their families if they find themselves out of work. Studies have showed that over the course of the last 10 years nearly 70 per cent of people in the UK needed a cash injection to cover an unforeseen expense. Combined with these facts, in 2006 22 per cent of people between 16 and 44 had a long-standing illness.

Research shows that the combined savings of the average family in the UK would last for less than three months.

However, there are certain key milestones in one's professional and personal life that should enable people to review their financial needs to regain control or plan for the future. They could include anything from buying a first house or upgrading to a larger home, getting married, having children, a change in career, sending children to university or a family wedding and ultimately retirement.

It is, therefore, no surprise that people invest in a huge range of specifically tailored insurance policies which can pay out when we need it the most.

Living in a country where the average age is decidedly lower than the rest of the world can make us feel like we will be young forever. However, UAE Government statistics show the population is ageing, more people are settling permanently in the UAE and many expatriates either don't have a cover or don't realise their existing policy, taken out in their home country, may no longer be valid.

So what is life and critical illness cover and why is it important? Critical illness insurance is designed to pay out a lump sum on the diagnosis of a specified serious illness. The proceeds of the payout can be used for rehabilitation, to provide financial security for family and loved ones, to pay off mortgage or existing debts or to sustain your normal lifestyle.

Most importantly, the money will provide you with the choice of whether to work or not, you could even choose to take a lower paid or less stressful job.

With financial independence more important than ever, regular savings for future requirements are a top priority. However, it is essential not to underestimate the benefits of a good life and critical illness insurance policy which is even more important.

If you already have a critical illness or life cover policy, ask your financial adviser if it is valid in the UAE.

Such cover will provide you with monetary security to focus on those unexpected priorities that life has a tendency of throwing at us.

The way to plan ahead is to view any requirements in a sequential way, depending on when someone might need protection or support.

The first element an individual should look at, is life and critical illness protection. The second is long-term retirement planning, followed by savings and lastly investments.

This order is important for the simple reason that if someone were to become critically ill or unable to draw a regular salary for whatever reason, and didn't have adequate insurance, then they wouldn't be able to afford to do the other three.

As I said, the statistics are scary, but with good insurance you can ensure you don't become one.

- The writer is Head of Personal Banking, Lloyds TSB Middle East.