Protecting Your Wealth Through Insurance

written by BVC July 20, 2016
Protecting Wealth

After working hard to create personal wealth, you need to protect it. The best way to protect your assets from major financial loss is through insurance.

Insurance is simply a promise of reimbursement for a loss in return for a premium paid. When shopping for insurance products, consumers should match their needs with what the product offers and seek out the best deal. You can buy insurance to cover all kinds of risks, but basic needs can be met with property, health, and life insurance.

There are many types of property, health and life insurance, so do your research and seek good advice.

Microinsurance – an option for protecting Wealth/Livelihoods
The Financial Services Commission of Jamaica (FSC) entered into a partnership with the Multilateral Investment Fund, which is a member of the Inter-American Development Bank’s Access to Insurance Initiative (A2ii), for a 3-year project ending in 2016, to provide capacity-building and technical assistance for the development of microinsurance business in Jamaica.

Microinsurance has been defined by the International Association of Insurance Supervisors (IAIS) as “insurance that is accessed by low-income population, provided by a variety of different entities…..” It is a means of protecting low-income persons or the “working class” against financial risks associated with life’s unexpected events such as illness, death, accident, or natural disasters, to name a few, that can take away their income.

After the occurrence of certain natural disasters, such as a hurricane, many low-income persons may find it difficult to recover from losses incurred and may be unable to financially sustain their livelihoods and families. In such situations, their financial position would worsen, especially if they operate micro or small businesses. They may find it difficult to purchase additional goods or pay creditors in order to continue the business. In the case of farmers, they may find it difficult to clear the land and purchase additional seedlings to grow crops. Microinsurance also helps in reducing the burden to the government when disasters occur, because insurance will help to cover losses sustained by low income individuals, thus enhancing financial security and risk mitigation.

The distribution channel of microinsurance products forms an integral process for low-income persons to obtain insurance. Alternative entities, other than traditional insurance organizations, such as: telecommunication carriers, utility companies, and retailers may be used to distribute microinsurance products.

Insurance companies may also form partnerships with other financial institutions, for example, micro- financing institutions and credit unions or other financial cooperatives to ensure that low income persons have access to microinsurance products. Through various approved entities, it is expected that microinsurance will be accessible by low income persons, including self-employed persons in inner cities and rural communities within Jamaica.

Here are some useful tips when shopping for insurance products to suit your needs:
1. Take advantage of discounted premiums available through group insurance with an employer or other organizations or associations of which you may be a client or member.
2. Consider the income and expenses of your household on a weekly or monthly basis and decide how much you can afford to pay for premiums.
3. Shop around and get at least three quotes.
4. Ask about other discounts that may be available (for a good driving record, safety equipment, multiple policies with the same provider, etc.) to reduce your cost of coverage.
5. Review your insurance coverage annually to make sure you have appropriate coverage, as your situation changes.
6. Ensure you do business with a registered insurance provider/agent.
7. As with all investments, be sure to get all the facts, that is, terms and conditions, before parting with your hard-earned money.

By Keron Morris
Manager, Office of Communication & International Relations
Financial Services Commission of Jamaica

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