When I hear the word insurance, the first image that comes to mind for me is a safety net. My introduction to the concept of insurance started with my personal finance class in high school. I learned that protecting assets like automobiles, homes, and jewelry are important steps to financial planning. Transferring the risk to an insurance company in this dangerous and unpredictable world we live in seemed like common sense to me. Except for one important fact at the time, I was in high school so I did not own anything tangible to protect with insurance.
To help make this tangible for high school students my personal finance instructor gave our class an assignment to create a real budget based on our first job after college. He created a fictitious job, along with a first salary and we had to create a budget from there. He said that insurance was a required line for the budget exercise. I went home that night and asked my father what insurance policies he owned. He spoke about health insurance and the challenges employers have with the increasing costs of employee insurance benefits. I had never considered that important before and he mentioned that many elderly people find part time work as long as the employer offered insurance benefits. After losing my grandmother to cancer, I did have a basic understanding of the high costs associated with treating a terminal illness. I did not connect the dots at the time that having health insurance and a cancer policy kept her from going bankrupt while she was treating her illness. After my grandmother passed away, my mom had to take care of all the estate details. She learned that my grandmother’s health insurance covered a majority of the medical expenses. It was comforting to know that while the family was grieving.
The other policy my father and I discussed was life insurance. I have some experience with this in the real world while I was in elementary school. A friend of mine lost his father to a heart attack. His dad was young, in his late thirties, married, with two elementary age boys. It was a horrible tragedy given the young age of everyone involved. The boys grew up quickly, literally before or eyes, without a father figure. The brother’s circumstances forced them to grow up even before the shock of losing their father wore off. Their mother lost her soul mate and now has to raise two boys as a single mom. The one bright spot in this tragic event was their deceased father had a large amount of life insurance. Both boys attended private school and they would continue to do so with their friends because of their father’s planning for the worst possible scenario actually happening. Life insurance replaced their dad’s income. That is one less strain on their mother as she copes with the loss of her husband. College tuition is no longer a concern because of this life insurance policy. Their mother, now a young widow, was not required to work in order to provide for her family. Having life insurance allowed her much needed time to process the loss. She can now work at her discretion if she wants to but she does not have to work. The “peace of mind” that comes with proper insurance is important psychologically but it also makes good financial sense too. In this case, their deceased father provided for his family for many years after his death.
Unfortunately, I have another real word experience with insurance. This time it involved my automobile insurance. Shortly after my sixteenth birthday, I had a minor accident that did some major damage to the front end of my car. Thankfully, no one was injured and the other car involved did not have a scratch on it. I had to file a claim, pay the deductible, and get the car repaired. I did not have transportation for several weeks and it was a hard lesson to learn. I am a more cautious drive because of it.
Insurance, from my perspective, means protection from the harsh realities of life. It is comparable to having an umbrella combined with a good rain suit in a monsoon. I will be facing these elements in the storm but I can do so and not get wet. I know college life will be complete in the blink of an eye. My professional career will begin and I will create a new budget based on that first paycheck. I know there will be a line in the budget for my personal insurance needs.
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