Insurance


INSURANCE PRODUCTS

The final tool of asset protection planning that we will discuss is insurance. There are different forms of insurance products. I will focus on just a few in this posting that will help preserve your wealth.

In terms of assets especially real estate and vehicles a critical way of preserving and protecting one’s wealth is through making sure that these are insured. If your property was to be gutted by fire and you have an All Risks cover then you would be able to have the restoration of the property funded by your insurer. Similarly for vehicles and other smaller assets. Most valuables should be insured to secure their value. It is amazing how assets are defined. Recently a cousin of mine who runs Pathfinder Luxury coaches realized the value of insurance when he realized that star international soccer players are heavily insured.

One can also insure his health since healthcare costs are a significant and normally unexpected bill in Zimbabwe. If one is on a medical aid/ health insurance scheme these costs are absorbed and managed. What many people especially in the informal sector do not realize is that if you attend to a doctor in Zimbabwe as a cash patient generally you pay more than someone who is insured. This is because medical insurers push medical costs down on behalf of clients whereas if you are on cash you are treated on a ZIMA (Zimbabwe Medical Association) or ZiDA (Zimbabwe Dental Association) tariff which is normally higher. The other factor is that sometimes illness strikes at inconvenient times. If one does not want to have health insurance then they should pray for a product that my team is working on that will not require prior commitment of funds for healthcare funding. Watch the space.

Another form of insurance product that is useful to wealth protection is public liability if one operates his business in a place where members of the public can be hurt. This form of insurance would pay if anyone got hurt while at your premises. This form of insurance protects your business from costs associated with accidental harm to members of the public.

In terms of business insurance one can also consider other forms of insurance like keyman insurance if the business depends on one critical person for it productivity, loss of income to compensate for reduced income during certain periods and if vulnerable to staff pilferage then fidelity insurance may be necessary.

Another critical insurance product is the estate duty insurance which would cover the costs of estate duties in case of your demise and the family needs to transfer property from your name. The best way of cause is to title property in a private limited company. Sometimes one gets this information after he has already registered property in his name. For example we have one property like that and so we had to work on an estate duty insurance to cover the costs of estate duty. If this is not done sometimes the family has been forced to either use scarce cash resources or to liquidate certain assets to pay estate duties.

Some people include life insurance in favour of your named beneficiaries. Personally I discourage life insurance because it is not effective in terms of investments and wealth management. For example a significant portion of your initial instalments for life insurance is paid to the insurance agent before it is credited to your account. I believe that life insurance is for lazy investors. The other challenge is that in Zimbabwe it is a costly and laborious exercise to get an insurance payout.

I suppose its clear that I definitely support insurance of assets in terms of wealth protection but am not convinced about the effectiveness of life insurance. If I absolutely have to take some life insurance then I prefer taking a short term insurance. I encourage that you talk to your insurance broker for a detailed assessment that would cover your needs.

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