Why have insurance?
Thursday 12 September 19
When it comes to insurance, that is a reasonable question, given that it’s going to cost you money. So, what should you do about insurance?
If you are a gambler, you might take one of two approaches:
- Not get any insurance with the hope and expectation that you will never have to make a claim. Think of all the money you could save!
- Get absolutely as much insurance as you can in the hope that either you will be permanently disabled and get rich, or that those you leave behind will never have to work another day of their lives.
My approach is different:
- Insure for those things you cannot afford to happen.
How does this work out in practice for me?
- I’ve got an old car, and I could afford to replace it. But it would make a significant dent in my pocket, and I would need to at least have a policy that would cover the new Mercedes that I might run into, so I go ahead and get comprehensive cover.
- My boat is similar, but my wife might not let me replace it, so it’s insured!
- My wife and I have health insurance, but we have a low cost policy that makes us pay the first $250 for a hospital visit plus $50 per day for the first five days. $500 we can afford along with the various gaps, but if the total bill had come to $50,000 we would struggle.
- We are close to retirement, so I don’t see much sense in insuring my life or ability to earn income. If something happens to one of us, we have what we have and simply retire a bit earlier. That was different when we were younger with a huge mortgage, and especially with kids at home.
It makes no sense to bury your head in the sand and hope that nothing bad ever happens. But it’s also crazy to live in fear of what might be around the corner. It’s much better to simply be realistic, think through the risk events, and work out what you would do. Then give it a sanity check. Is it truly realistic? Work out what the financial shortfall is for each type of risk event, and that’s the amount of cover to get
Think of others
It’s easy to say, “well if I die, I know where I’m going, and life will be better there, so why worry?”
No need to worry, but it is time to shed that self-centredness and think about your family. What about your spouse and kids? What are you leaving them with? Consider what your spouse would have to do in order to look after the kids. Naturally, it’s a lot easier once the kids leave home, but in your case that might be quite a ways away. Now might be the time to cover what they can’t afford to have happen!
This is a good time to have a heart to heart talk as a couple. Each of you need to know what to do if something happens to the other. It’s a good exercise to review the wills, make sure that each of you know where financial records and other important documents are, and what each of you would want if you were to pass away.
I’m certainly happy to help you through the process. Give us a call and set up an appointment, either in person or by phone or video link. Click Here