There are several possessions such as assets and valuables we purchase in life without question almost regardless of price.
Majority of people donât understand why until they become adults or deal with aging parents. The sad truth is that we donât change until we are forced to when itâs typically too late.
Without these investments we feel unsafe, vulnerable and trapped under a rock.
Thank goodness for insurance. A treasure most of us are unfamiliar with yet invest in anyway which in this case is a good thing! For the rest of your investments, especially within the wild west of the stock market, if you canât explain what you are getting into in simple terms, donât do it.
In that case, Iâm talking about dogecoin.
Simply put for those who donât bother looking into, insurance is a contract between your insurance company and beneficiary to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
In English: It is protection and coverage against the unknown.
Casino Cash
Everything in finance is a bet which is essentially gambling.
This isnât just involved within options to forwards. Itâs in your basic index funds and in the safest investment of all; U.S. government debt.
Although professional conservative money managers a.k.a fiduciaries, those who act in their clientsâ best interest, preach to avoid tactile active investing, tying emotions to decisions, day trading and charting price and momentum via technical analysis, you still canât get away from Vegas no matter how risk adverse you may be. Itâs all intertwined in investing somehow and thereâs no way to get around it.
Itâs a marketplace after all!
From innocent lemonade stands to charity, institutions and universities to social media, these marketplaces are all trying to sell something and make lofty promises to consumers.
One of the most important things to remember whenever purchasing a product or placing a trade is that the other side doesnât care if you can afford it. They want you to still have it while in debt or not.
When you start to think of everything from a business perspective, you will make wiser financial decisions. We realize these are sneaky salespeople in front of us always trying to sell something we donât need with money we donât have.
And remember, when something is free, you are the product sold to third-parties. Who knows what happens after that! Yet clearly 2 billion and counting still donât care on Facebook.
Anyway, no matter how big or small, itâs important to be aware of the world of gambling and how companies bet on us. In the case of insurance, they are betting how long we will live.
After all, itâs unfortunate that majority of business models rely on customerâs mistakes, gullibility and faults. When youâre late, you pay a fee, when you have an extra bag or its too heavy by a pound, an extra carry-on overweight baggage fee is added onto your $600 flight. Or even if your driver blasted music and was careless the whole ride, you are still required to provide a tip since you canât get rid of the option on your screen!
As consumers we are bombarded by annoying options in order for us to pay more and most of the time, we end up paying for something we donât need which could all be avoided in the first place if we paid more attention to the details, werenât too comfortable or reliant on convenience.
Pay Attention
Although all of us are guilty of buying something we donât need especially since an average Americanâs home has roughly $10k worth of stuff lying around, there is one thing that Americans should spend more time on that they eventually will need. That is on healthcare.
Iâm shocked and astonished by the amount of Americans who are uninsured. For the rest of the world, they donât have to worry since education to health care are completely free. No wonder 90% of Americans are in debt! The number one reason is due to pesky medical debt. If you need an ambulance, a 3 minute drive can cost you thousands.
Fortunately, according to the census Bureau Helath Insurance, about 27.5 million people do not have health insurance for any coverage in their life. This may seem like a lot and it sure is but for the total population of roughly 300 million this is only about 8.5%.
Due to pandemic, rates have been going up as people realize that their health is priceless and they would rather have a peace of mind and spend a little more per month to know that if anything goes wrong, they are insured than pay extraordinary amounts out of pocket.
Health, life, car, disability, dental, kids, home, all your valuables, possessions and gifts need to be protected. Anything that can go wrong, you want insurance to cover it so you donât have to sell your investments or go into debt drying up your retirement savings. Even my dentist has hand insurance since she relies so heavily on them. If she ends up getting arthritis and cannot clean my teeth, the insurance company will pay her a fixed salary equivalent or more to the one sheâs earning now. The earlier she gets it, the more the insurance company looses and less fixed payment she pays.
Itâs better to be safe than sorry. Even for an airline, although you donât want to think about it, most flights offer insurance just in case.
If you donât have health or home insurance, if you get in a serious accident or your house burns down, the expensive reparation plan can result in poor credit and even bankruptcy if you donât have insurance to cover it.
At the same time, when something happens, one usually has to take time off to deal with the circumstances and this might negatively impact employment for many working pay-check-to-paycheck.
Getting into debt, let alone medical debt doesnât just ruin your adult report card a.k.a your credit score which is necessary to build wealth, it prevents you from taking out good debt (mortgages, loans for a business) as well. Your everyday life is practically put on hold. You need to be much more stringent on paying back your debt on time not incurring additional penalties and higher interest rates. Debt is distracting you from saving and living life.
In Your Hands
Something to note about insurance is that as much as it is necessary and no doubt vital for a safe and secure future, especially when you have dependents (the recommended time to open it), it is still costly and eats into a monthly budget, the main reason Americans donât bother with it.
They live on the edge and believe everything will be jolly forever which in reality, is costing them way more in the long run.
Yet a massive upside to insurance is that you actually have control over the rates and your deals.
If you live longer, the insurance company gets all the money youâve been paying for the past 50 years or however long the term contract is set to expire for but if you die early, your beneficiary (children, spouse, etc.) receive the invested payment (principal) that you were planning on paying until that expiry date. at the time of your passing or injury (whatever the insurance may be for) and the insurance company looses money.
For whole life insurance, the insurance company invests that money and you earn it back when a family member passes.
At first this didnât make sense to me.
Why would you give an insurance company money each month and receive the same amount when you die?
If you die earlier, you immediately receive the intended expiry date amount and they lost the bet.
If you die later, you still receive the money, invested and pay nothing extra if something happens in-between.
Either way, you arenât loosing money you are just giving up more during your lifetime to help save your loved oneâs future. It all goes in their hands.
If you donât have insurance, you have to pay out-of-pocket care which is always more than one can fathom, wonât receive death benefits, nor guaranteed returnable invested money.
Tick Tock
Getting insurance is tricky especially timing wise. Ideally you want to wait for a point in time when you believe you need some help and financial backing. As a college student, itâs too early for yourself but for your parents, itâs a big risk not to have it already.
It is recommended you take out insurance when you start having dependents and more responsibilities. The worst scenario far too many families are in is when a family relies on 1 income or even worse, 1 person to keep the family afloat. If you are the sole bread winner of the household with kids and a spouse depending on you, you better get insurance ASAP since regardless of age anything can happen and they cannot live without you.
Life isnât guaranteed.
When my father unexpectedly passed a few years ago, my mother and I were fortunate to have umbrella and life insurance set up so we would receive a lump sum at the time of his passing. Without it, the funeral expenses would have been too costly on top of loosing a substantial income source.
Ideally, the earlier you can take out insurance and open up a plan the better since you will get it all invested back eventually and it brings you an unmatched peace of mind. The healthier you are, the higher life expectancy you have which the insurance company likes so they can earn and collect your money every month until your 100 birthday. The unhealthier you are, the lower monthly premiums you pay but in reward, receive less since you have a shorter-time span. They donât make as much from you.
Although your genetics and biological health cannot be altered a whole lot, you have more control than you think. From your location to your food sources, you wonât break a budget taking care of yourself. In addition, considering women account for more than 80% of widows in the world, it is vital females take charge of their financial health and set up check-ins with their partner to prepare for the worst, hope for the best.
The Case of the Insurance
No doubt insurance is a depressing decision and discussion. Death, injury, the âwhat ifâsâ are all dreadful yet frankly necessary to discuss in order to move on and prevent them from taking a turn.
Insurance is an easily avoidable topic although it really shouldnât be because without it life would be more complicated.
What trips people up isnât insuranceâs purpose. People are smarter than they think and are well aware nothing and no one lasts forever, whatâs certain is uncertainty and things are inevitable.
They just donât want to face perspective in reality.
We all have that date on our calendars. Itâs just a matter of getting off the couch and securing your future for the better. Just like with the vaccine, thereâs no reason not to get insurance. You are only putting yourself in jeopardy.
We donât live under a rock and accidents arenât expected nor planned hence the name. The most annoying thing is that they are usually outside of our control as well.
For example, the most common car accident causes are due to rear-end collisions. They account for 33% injuries according to data from the National Highway Traffic Safety Administration. Side-impact collisions, rear-end accidents and head-on crashes are usually caused from someone else not necessarily yourself thatâs why its even more important to be insured so the driver doesnât blame you. If they donât have insurance, they wonât insure you a repair vehicle or take you to court and fight over the damage.
Once again, just like with the vaccine, the recovery process is smoother if both parties have it.
Same deal with medical or home insurance. Things can go wrong anytime and you wonât always be prepared. Since we are creatures who own many things, assets, possessions, hundreds of possible scenarios could go wrong. Might as well construct a Monte Carlo Simulation on your life instead.
To stay truly sane, I would suggest having umbrella life insurance policy that covers any possible liability you can think of. From am oven fire to car dent, you are insured and donât have to go through separate agencies and be on hold for 2 hours. Itâs all found in one package.
Although itâs all a bet against your life, insuranceâs main goal is to keep you protected as promised. Do yourself a favor and during the dog days of summer, sit down with your loved ones to make sure they are protected.
Tomorrow is too late.