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Be prepared for the unexpected

Wednesday, February 1, 2012
Are you prepared for situations outside of your control?
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It's been a year since last February's major Canterbury earthquake — when the lives of many Kiwis were turned upside down. While the people of Canterbury are working on rebuilding their lives, communities and Christchurch city, many are still suffering financial stress.

In life there are many events we plan and prepare for, like starting work, buying our own home or starting a family. But sometimes situations outside of our control can throw our plans off course, whether it is a natural disaster, an accident, or changes to your health or your work situation.

While it's not easy to think about, it's important that if the unthinkable does happen, you and your family will be okay financially.

There are many types of protection and it can be hard deciding what kind of cover you need. A good place to start is to consider what is most valuable to you and the assets you need to protect. It may be a combination of things like your family, health, income, family, home and car and health.

Next, think about how you can protect these assets. Insurance is the most common option. Some types you may be required to have, for example if you have a mortgage the lender will require you to have house insurance. Others types, like income protection, health, or life insurance, are all about individual choice and whether you decide to take them will depend on your circumstances. For example, life insurance might be more important to you if others rely on your financial support. And remember, your income is likely to be your largest asset over your lifetime — so it's worth thinking about what steps you need to take to protect your ability to earn.

When considering your level of cover, it's about striking a balance. Consider the cost of insurance and how much risk you're willing to take. If your car isn't worth much, you might choose third party car insurance, so you're covered if you damage someone else's car, but any damage to your own you pay for yourself.

If you already have insurance, check it's up-to-date and set yourself an annual review so that you're sure your insurance takes into account any changes in your circumstances.

As well as insurance, it's also good practice to save up an emergency fund — around three months' income so that you have ready access to cash when you need it. It takes time and commitment to build up a fund that size so consider how you might be able to access that money in other ways, in the meantime. It could be an arrangement with family, access to credit, or equity in a home.

Checking out the insurance section on the Sorted website is a great place to start when making decisions about how you'll protect your assets. It's full of useful tips, advice and information outlining the various types of insurance to think about, so you can make an informed decision that's right for you and your family.

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