Insurance: protecting your plan

Insurance is the part of wealth management that protects everything else. Its job is to transfer catastrophic, low-probability risks to an insurer for a known premium — so a single bad event cannot destroy years of saving.

Insure the big, rare losses — not the small ones

The principle: insure what you cannot afford to absorb, self-insure (through your reserve) what you can. Paying premiums to cover small, manageable costs is usually a poor trade; protecting against the rare event that would be financially devastating is the whole point.

The types that matter most

• Life insurance (seguro de vida) — essential if others depend on your income. It replaces your earnings so dependents are not left in hardship. Term life is typically the most cost-effective for pure protection.
• Disability / income protection — losing the ability to earn is often a bigger financial risk than dying; cover for serious illness or disability protects your most valuable asset, your earning power.
• Health insurance (plano de saúde) — a serious medical event is one of the most common causes of financial ruin.
• Property and auto — protect high-value assets (home, car) against loss you could not easily replace.

How much, and watch the details

Match coverage to the actual financial hole the event would create (for life cover, think in terms of dependents' needs and outstanding debts). Read the exclusions, waiting periods and coverage limits carefully — the cheapest policy that does not pay when you need it is the most expensive of all.

Products, terms and regulations differ and change; review your coverage periodically and as your family and assets change, and confirm current terms before buying.