We don’t like to think about insurance.
We don’t like to think about bad things happening to us or to our stuff. We don’t like to think about getting old or getting sick. But most of all, we do not like spending money on something that we don’t see as useful for ourselves.
The key question to ask yourself before considering ANY type of insurance is:
“If I don’t have this insurance and something happens – then what?”
We tend to not think about the outcomes too far into the future, and this can be a problem. Let’s explore deeper. There are 3 types of insurance:
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Mandatory coverage
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Just in case
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Guaranteed to happen
Some coverages are mandated by the government, to enhance the safety of the society. These coverages are there to make sure that if YOU do something wrong, the OTHER side will get paid. It covers Your Liabilities.
Examples for these can be found in personal and business insurance:
- Minimum auto insurance coverage for any vehicle on the road – that is required by the state, or
- Bonds to cover claims against negligent contractors – which are also mandated by the government, to make sure that the customers are protected.
Another government-mandated type of insurance applies to all businesses. It is there to protect the employees of the business. You have probably heard about them:
- Workers Compensation,
- Unemployment, and disability insurance
Financial institutions also require insurance coverage for whatever they are financing. If you still owe money for it – the bank wants to make sure that THEIR assets are covered, at least until you pay them off. This applies to:
- Stuff – cars, boats, ATVs, airplanes, RVs, etc.
- Mortgages
- Business loans, etc.
We are all used to protecting the stuff that we are required to protect. But what happens after you pay off the loan on your boat, car or a house? Do you keep paying for insurance – now, that it’s no longer mandated by anyone?
Would you rather save the money that you were forced into paying during the course of the loan? You can usually save a good chunk of change, if you cancel your coverage. Just imagine having that cash in your pocket right now, instead of it being blindly deducted monthly or annually from your bank account.
But then you think:
- What if my fully paid off house gets struck by lightning and burns down? Then what?
- What if my fully paid off car gets hit by an uninsured or underinsured driver? Then what?
Putting it this way makes you think, doesn’t it?
This is when we enter the Just in Case territory of insurance.
Full coverage on a fully paid off vehicle is a Just In Case insurance.
Full coverage on your Home after paying off a 30 year mortgage is Just-in-Case insurance.
Neither are mandatory, but most people usually choose to keep it. It makes them feel safer about their future. Who wants to lose a house without the means to get it rebuilt? Or having to buy a new car after getting hit by an uninsured driver? Nobody, would be our guess.
Health insurance is the next big one on the list.
It’s no longer mandatory on the federal level, at least for now, but ask yourself:
- What if I trip going down the stairs in my home and break a leg? Then what?
- What if my spouse gets sick? Then what?
All of these questions and issues can be addressed in a lot of ways. One of them is to do nothing and not get health coverage. Another is to explore your options.
Did you know that besides a regular health insurance there are other options? For example, to get health coverage for themselves, most self-employed insurance agents use Short-Term health plans (when their state allows it). Those plans are usually much cheaper, due to high deductibles. And you can add an emergency coverage, which takes care of that sky-high deductible in case of an actual emergency – like the broken leg example above. We are not saying that this is what you should do, but it’s useful for you to know about your options. There are multiple ways to create insurance coverages and you can always find an affordable product that fits your needs.
Moving on down to the Guaranteed to Happen part of insurance…
We are all getting old. And with the age we usually start thinking about Retirement. Retirement is an antiquated concept at this point. Seniors tend to live longer and are more active. A lot of us continue working well past the “retirement age”. Some work because we feel more fulfilled from contributing to the society, while others are forced into working, because they cannot afford not to work.
Retirement in it’s former sense of the word is not fully attainable by most people. As of 2021, experts estimated that it takes about $1,000,000 in savings to retire at the age of 65. Generations after the cash-rich baby boomers are expected to work for life. So, ask yourself:
- If I want to stop working at 65, or 75, or 85? Then what?
Will you have enough saving to maintain your lifestyle? Will you need to downsize your home to afford to live?
If you were prudent throughout your life and you have a good 401(k) and Roth IRA, life insurance with savings options can be a great next step.
- What if you need Long-Term Care? Then what?
Is your family able to afford a full time nursing care for you, without ruining their financial futures? The annual cost of a private room in a nursing facility was over $100,000 in 2021.
All these things can be addressed by a knowledgeable insurance agent, who has access to the best plans. But you – the insurance consumer, should know and study these possible options. Otherwise, you would not know to even ask.
“In this world, nothing is certain but death…”
The old saying also mentions taxes – but that’s not always true. Just ask a life insurance agent how to do it…
We do not like to think about death, and even when we do – it always seems like an event, that is very distant in the future. But, no matter how much we want to live forever, we must plan for the end. Ask yourself:
- What if I died right now? Then what?
Who will take care of your funeral expenses? Who will pay your final taxes (which must be paid)? Who will repay your debts?
– If you did not leave them any money, do you expect them to pay for all this from their own savings?
– Who will support your family and for how long?
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We all take calculated risks every day. We pick the most important tasks to do and we concentrate on doing them, before moving on to the less important ones.
Insurance is exactly the same. While some of it is required, majority of it is based on your priorities and your needs.
If it fits your needs and plans – get it. If not, then move on to another option that works better to fulfill your life goals.
“Wait!!!“ – You will say. –“How do I learn about all of these different options and strategies, without actually becoming an agent and learning all of this?”
This is where we come in.
InsuranceExplained.org was created to educate with a concentrate only on the important aspects of insurance, without going deep “into the weeds”. Kind of like the Cliffs Notes but for Insurance. We wanted to avoid the dry textbook descriptions and concentrate on what really matters – We call it Key Point Education (KPE). We help you understand what matters.