No one thinks that it is unusual for people to take out insurance to cover valuable possessions, such as a car or a house. But wouldn't it also be wise to take out insurance for your most valuable asset? You may be wondering what could be more valuable than your car or house. It is obvious, however, that it is what allows you to buy your car and your house: your family's income.
LONG-TERM WORK INCAPACITY
The risk is by no means imaginary and it can happen to anyone: one in ten people experience a period of long-term work incapacity during their career, whether as a result of illness or accident. All those who take out a mortgage loan also take out outstanding balance insurance, which reimburses the loan in the event of death, but no one thinks of work incapacity, which nevertheless leads to a sharp drop in income, and which may make it impossible to repay loans. And yet, the risk of work incapacity is infinitely greater than the risk of death.
An inability to work severely disrupts your financial planning, because your income is suddenly reduced to the legal intervention, while your expenses remain the same. Worse still, you suddenly have medical expenses which you did not have before. This can jeopardise your standard of living as well as your pension. Such a situation can have very serious consequences, especially for a self-employed person. For this reason, it may be wise to take out insurance against long-term loss of income, as well as insurance for medical expenses.
Take note that since the beginning of 2016, there has been a change in this area for older employees and self-employed people. Since then, the insurer can pay the supplementary pension capital only when the insured person takes his or her statutory pension, i.e. at age 65 (67 in 2030) - with a few exceptions. Previously, these pension plans ended at age 60. Insurers can extend contracts which end at age 60 to age 65 (67 in 2030). They are not obliged to do so, but this is recommended, since the capital can only be paid out at the time of the statutory pension.
However, this extension is not automatic. On 1 June 2017, a new code of conduct came into force for insurers. Through it, they want to offer a solution to the people they insure who will have to work longer than the age originally planned for this coverage. This will allow insurers to extend the plans and adjust their rates for this extension.
Spouses build their projects together. But what happens if the marriage fails? In our country, just under one in two marriages ends in divorce. This risk is therefore not imaginary. A divorce has a huge impact on a couple's financial situation. Income is not affected, but expenses increase. Divorce entails costs, for example lawyer's fees (now with VAT). The change in family status also results in a change in taxation. All of this has a huge impact on your ability to save money. It is therefore useful to verify how the marriage contract can affect personal wealth. For this reason, protect your income from divorce.
And the consequence of a divorce is often a blended family. Remember that this can also have a significant impact on the protection of your family income.
It is human not to want to think about premature death, but we must also take it into account. It is impossible to ignore the financial impact it would have on close relatives. If you have life insurance, your spouse will receive this amount, but will it be enough to compensate for the loss of your salary?
Note that in 2017, the withholding tax on income from movable property increased from 27% to 30%. This also has an impact on some life insurance policies. Which ones? You can read about it here in detail.
Some fixed costs will not vary, such as personal credit. And what about the family home? Outstanding balance insurance is the right solution in this case. With adequate protection, your children will grow up without worries and they will be able to pursue the education they want. Think about your family's income and protect it in the event of premature death. For blended families, it is also very important to consider changing the beneficiaries of life insurance policies. Too often, people still do not think about making the necessary changes.
OTHER UNFORESEEN CIRCUMSTANCES
No one is immune to unemployment. It goes without saying that the loss of your job would have a major impact on your financial situation. And there is no guarantee that you would find a job which would pay as much. There are still other unforeseen situations in life: a car accident, for example. This can be particularly disruptive for those who really need their car for work. In this case, comprehensive insurance offers good protection.
It is also recommended to have a savings reserve which is available immediately. A survey carried out in 2018 at the request of NN shows that many Belgians who are suddenly confronted with a long-term illness or dismissal are not prepared to face a sudden financial shortage. Based on the general rule that families must have a 3-month savings reserve to cope with unexpected financial setbacks, it can be said that half of Belgians (49%) between the ages of 18 and 74 do not meet this requirement.
Good financial planning must take into account all of the unforeseen circumstances in life. This does not take away from the risk, but at least the financial consequences would be limited.
NN offers you all of the necessary types of insurance to protect your family income, outstanding balance insurance ensures the repayment of your mortgage loan, and life insurance guarantees the financial protection of your family in the event of your death. NN also offers (supplementary) work incapacity/invalidity insurance, as well as a "cancer" guarantee with outstanding balance insurance.