How to Build a Financial Net

Building a financial safety net is a very important issue in your financial planning. No one knows what will happen in the future and if you don't pay attention on possible risks like illness or injuries and you are unable to work in the future you are not prepared to solve your financial problems and the consequence will be "a financial disaster". Can you pay all your bills when you are unable to work for several months? Probably not and what are you going to do if you come in such situation? Probably you have some money in your savings account or you have some mutual funds which you can use to pay your bills for several months but that doesn't solve your problem on the long term.

A good solution to prevent this problem is to take long-term disability insurance. Some of these are offered by their employers but other people can take such insurance individually. Two types are possible: non-cancellable or guaranteed renewable. In both systems the insurer is obligated to renew the policy and he also can't cancel it. In case of a non-cancellable contract the premium can't raise above this is submitted in the policy; with a guaranteed renewable contract it is possible that the premium can raise but only in case of the entire class of policyholders, not for one person only.

Life insurance is another important safety net if you want that your dependents like your spouse or your children maintain their financial needs. It protects them against the bills for the funeral, the medical bills in hospital, outstanding debts and especially mortgage or car payments and education costs.

Health insurance is necessary to protect you for the high costs of a doctor, hospital visits and certain medicines. Some countries offer you also the possibility to take hospitality insurance which save you a lot of money in case you need to stay for a long time in hospital. This system doesn't exist in all counties of the world but it is popular in certain countries of Europe.