How to prepare for a crisis

In times of a financial crisis, there are a number of rules to follow to mitigate the effects of the crisis and to assist when coping with a suddenly added burden. In this article, we follow on the previous one on how to prepare for a crisis.

By  Martin de Kock (CFP®)

In times of a financial crisis, there are a number of rules to follow to mitigate the effects of the crisis and to assist when coping with a sudden added burden.

In previous articles by myself and my fellow director Wouter Fourie (CFP®), we discussed how the speed with which action is taken can affect your risk, thus proving critical in securing your financial future.

Let’s take a look at more rules when preparing for a crisis.

A crisis is defined as a time of intense difficulty or danger and is often associated with a time when difficult or important decisions need to be made quickly. It is therefore essential to obtain insurance cover for dread diseases as part of your preparation and planning.

Should you suffer from cancer, a heart attack or a stroke you could have insurance cover in the form of a cash lump sum.

Scrutinise your policy to assess how much your insurance will pay out and for what – policies often differ. Activities of daily living is often a consideration when determining the extent of payouts and it is critical to examine the fine print for any exclusions. It is an industry norm that suicide within a two-year period from the inception will not be covered. There could be a waiting period during which the policy may not pay out; however, this money will go a long way in paying for things like nursing care or prosthetics. Possible treatments abroad that are not available locally can be financed from the proceeds of these claims.

A frequent mistake is to consider your beneficiaries first, instead of yourself. Leaving money in your estate to loved ones is noble, but never let this supersede your own needs when considering your daily living expenses. Thinking about how long you will live, not how soon you will die, should be a constant reminder to yourself.

If you are unsure about the details of your policy or have complicated financial affairs, it will be an advantage if you engage with a registered and approved financial planner. Such a planner will help you through many pertinent issues and prevent you from making silly mistakes, something that we all tend to do.

Be sure to also read insights into other risk factors on the page of Wouter Fourie (CFP®)

I will continue to look at more rules to follow in preparing for a crisis in more detail in the weeks to come.

This article first appeared on moneyweb.co.za at https://www.moneyweb.co.za/financial-advisor-views/how-to-prepare-for-a-crisis/

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