Having insurance should be important to every adult, because you never know when the family’s ‘bread-winner(s)’ may pass away (or suffer serious, expensive injuries), or even when large expenses (like a mortgaged home) can suffer harm, as in a flood or fire. In fact, I would say it is financially irresponsible for a parent to not own life insurance if they have kids. Unless you are drowning in money (as most of us aren’t), the sudden departure of a parent can wreak havoc on a family’s finances.
There are many types of insurance policies and coverage amounts and deductibles, and insurance covers life, home, car and your personal health, among other things. It was designed to help people with large payments they might not have extra cash for, by spreading payment among all policy holders through their premiums. So long as insurance company payouts for claims don’t exceed income from premiums, they profit and stay afloat, and the insured get policy coverage paid when their damages meet the contractual criteria. Some companies offer term life while others whole life insurance. Term can be cheaper, but only covers you if you die within the stated term.
When people defraud insurance companies, like making false claims or staging rear-end car wrecks by slamming on their brakes while having an accomplice box the victim in, we all pay more for our insurance, because all costs are spread around among policy holders. So you can minimize your premium costs by shopping around, having no claims, driving safe, securing your home against fire and break-ins, by having a high deductible (where you pay more out of pocket if you ever make a claim) and by reporting all forms of insurance fraud.
When choosing an insurance company, make sure it is reputable and has a solid credit rating, so they will be there when you need them. Sometimes the lowest rates come from the riskiest of companies. At the same time, online companies that cut out the expense of a storefront and many employees may offer better rates from those efficiencies. It’s often wise to buy from an objective broker, who is paid only when you choose what offer is best for you. Also, the companies that advertise nationally have to recoup those invested dollars, so more no-name companies may offer you a better deal.
You need to estimate how much insurance you will need. On things like car insurance, states often require mandated minimums. It is more expensive to over-cover an asset, but it is also a surer way to get replacement value if the item has increased in value, or to compensate for inflation. On mortgages, once you have enough equity, you can stop paying PIP insurance in many states.
Having insurance is personally important to me because when my grandfather died, unexpectedly, and not at a ripe old age, my grandmother (who had hardly worked a day in her life) was fortunate enough to be the beneficiary of a death benefit life insurance policy, because my granddad planned for the future and the unexpected. Had he not, at an older age, my grandmother would have had to start from scratch in the work force, having few skills, a mortgage, and competing with much younger workers. Again, it is only prudent to cover life’s biggest expenses with insurance, for that rainy day you cannot plan for, but which randomly and invariably comes with life.
Having insurance is also personally important to me because of a road trip and ski trip my family experienced. Using a rent car, a rock hit our windshield, and our insurance policy covered its replacement, as we had declined rental company coverage. On the ski trip, a gentleman rear ended us in the snow, then gave us what was apparently a fraudulent driver’s license. We could not call the police so high up in the mountains (emergency calls only), but when we arrived home our insurance company informed us they could not locate the man based on the address, phone, license plate and driver’s license numbers he gave us in front of his wife and daughter. It’s important to always have police investigate automobile accidents, so bad situations like that never happen to you.
In short, because life is risky, you need the assurance and certainty of insurance, to account for random accidents and occurrences. You never know when someone may prematurely die, when a bad driver may side-swipe you, when a house fire can damage your home, or when you might incur a serious health calamity. At least be sure those things don’t destroy your financial well-being.
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