Emergency Fund, Insurance, or Both? “Rainy days” may require more planning on your part

Emergency funds and Insurance for “rainy days” (Photo credit: Christopher S. Penn)

You’ve heard that a million times (I hope): “Have an emergency fund!”. “Pay yourself first!”. “Save! Save! Save!”. No matter how strict you are with your budgeting and saving for emergency situations, you still can’t take the unknown out of the equation: “How long will my emergency fund last, if something happened?” “Something” could be any major transition or family crisis:  losing your job, getting sick or “hit by a bus”, losing your home and other property to hurricane, tornado or flooding, car accidents, even a large appliance replacement, or any event that would put a big hole in your pocket.


What you can’t cover yourself with an emergency fund, you should cover with insurance.

Some of the unexpected emergencies could really put you in a deep financial hole:

If you lost your job tomorrow, how long will you survive without a paycheck?

How soon do you think you’ll be able to find another similar paying job? (employment centers advise that it generally takes 1 month for every $10,000/year in salary to find a new job of equivalent salary. In other words, If you made $40,000/year, expect your job search to take about 4 months). Think of the chunk of income that would be missing from your current budget and household finances while trying to find a new job!


In case of an illness or accident, how long will your savings last?

If you get sick, on top of loss of wages you will also encounter additional medical expenses, deductibles, related expenses not covered by insurance, transportation and lodging expenses if you have to travel to other places for treatment, spouse taking time off to care for the sick or injured.


After your emergency fund ends, what will you have to sacrifice?

Saving money for emergency situations should be your first step for small emergencies, but what if the effects of your catastrophic event will extend beyond your savings? What will you have to let go of, first? Your house? Your family’s comfort? Your children’s education? 


Solutions that will protect, extend or replace your emergency funds

Did you know that there is insurance that will continue your mortgage payments if you lose your job? Did you know that if you get sick or hurt and can only work part time losing part of your income, there is insurance that can help to make up the difference? Did you know that if you have a heart attack or get cancer, you can receive a lump sum benefit from Critical Illness insurance? Whatever your “pain” is, there is a solution that can fit your needs and protect you if the worst were to happen.


“What if I just saved the money I’d spend on insurance, instead? Wouldn’t I be better off?”

Most of us don’t save enough as it is. Plus, adequate insurance should only cost about 1-3% of your annual income. It is recommended to save 10% of your annual income just for retirement and emergency funds. If you saved for 10 years, then have just one year without an income, all of your saved funds would be depleted.  Insurance may cover you during many years of income loss: disability insurance for example, will pay a monthly benefit (normally 65% of your previous earnings) for 2, 5, 10 years or even to age 67 (normal retirement age). Then, long-term care and Social Security will kick in.  Or, if you get diagnosed with cancer you could get a lump sum benefit ($50,000 to $500,000 in a single payment) from a cancer or critical illness insurance policy. Wouldn’t that money come in handy to replace income lost, use alternative treatments not covered by major medical insurance, pay off debt, or take a family vacation and time off? Of course it would! Don’t wait until emergencies happen, you should be covered BEFORE “it hits the fan”

Low cost insurance solutions may just save you and your family from financial disaster. It will help you from losing your home or downsizing, or letting go of other assets, family plans or children’s education.

Get protection today: call 239-543-3489 (239-LIFE-GUY)  or email  EmergencyInsurance@LifeGuy.com


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Author: LifeGuy

Daniel LifeGuy Dragan has 125 posts in this blog.

Daniel is a dedicated insurance expert with a focus on helping individuals, families and small businesses avoid financial disasters with Life Insurance products, Paycheck Protection (Disability Insurance), Retirement planning, Cancer and Critical Illness Insurance, executive and business protection plans. With his comprehensive knowledge and experience in financial protection, Daniel can help save money as well as get all your insurance premiums returned to you if you didn't use any of the benefits. "Return of Premium" insurance is one of Daniel's strengths and along with his personal approach to his customers' needs, one of the main reasons his clients are referring him to friends, family and business partners. Daniel offers free financial consultations and can be reached by email at Daniel@LifeGuy.com or phone: (239) LIFE-GUY or 239-466-4466

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