Lesson 1 of 3 · 5 min read
Why protection comes before investing
Investments build over the long term; protection stops a single event from destroying that structure. The order matters.
It is tempting to jump straight to investing once you have an emergency fund and the expensive debts under control, because investing is the “interesting” part. But there is a risk that the emergency fund, designed for small to medium shocks in the short term, doesn't fully cover: a major event (serious illness, long-term inability to work, the death of the main earner).
Protection (the right insurance) transfers this major risk to an insurer, in exchange for a relatively small and predictable premium. Without it, an unfortunate event can wipe out years of saving and investing built earlier. That is why basic protection logically comes before serious long-term investing.
It doesn't mean “insure everything”
Protection means covering the BIG risks, with severe financial impact and relatively low probability, not insuring every object or minor event, which often costs more in premiums than the risk would cost if you bore it yourself.
In short
- Protection transfers the risk of a major event to an insurer.
- Without it, a single event can wipe out years of financial progress.
- It doesn't mean insuring everything, only the big risks with severe financial impact.