With all the expenses of everyday living, it’s tempting to think of insurance as just another cost. What’s harder to see is the potential cost of not buying insurance—or what’s known as “self-insuring”—and the hidden bargain of coverage.
The Important vs. the Urgent
We’ve all experienced it: the tendency to stay focused on putting out fires, while never getting ahead on the things that really matter in the long run. For most people, there are two big things that matter in the long run: their families and their ability to retire. And being properly insured is important to both those concerns.
Life Insurance: a Hidden Bargain?
It’s exceedingly rare, but we all know it can happen: someone’s unexpected death. Life insurance can prevent a financial catastrophe for the loved ones left behind if they depend on you for income or primary care—or both.
The irony is that many people pass on coverage due to perceived cost, when in fact it’s far less expensive that most people think. The 2016 Insurance Barometer Study, by Life Happens and LIMRA, showed that 8 in 10 people overestimate the cost of life insurance. For instance, a healthy, 30-year-old man can purchase a 20-year, $250,000 term life insurance policy for $160 a year—about $13 a month.
Enjoy the Benefits of Life Insurance—While You’re Alive
If budget pressures aren’t an issue, consider the living benefits of permanent life insurance—that’s right, benefits you can use during your own lifetime.
Permanent life insurance policies typically have a higher premium than term life insurance policies in the early years. But unlike term insurance, it provides lifelong protection and the ability to accumulate cash value on a tax-deferred basis.
Cash values can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement.
When you borrow money from a permanent insurance policy, you’re using the policy’s cash value as collateral and the borrowing rates tend to be relatively low. And unlike loans from most financial institutions, the loan is not dependent on credit checks or other restrictions. You ultimately must repay any loan with interest or your beneficiaries will receive a reduced death benefit and cash surrender value.
In this way, life insurance can serve as a powerful financial cushion for you and your family throughout your life, in addition to protecting your family from day one.
Disability Insurance: For the Biggest Risk of All
The most overlooked of the major types of insurance coverage is the one that actually covers a far more common risk—the risk of becoming ill or injured and being unable to work and earn your paycheck.
How common is it? While no one knows the exact numbers, it’s estimated that 30% of American workers will become disabled for 90 days or more during their working years. The sad reality is that most American workers also cannot afford such an event. In fact, illness and injury are the top reasons for foreclosures and bankruptcies in the U.S. today. Disability insurance ensures that if you are unable to work because of illness or injury, you will continue to receive an income and make ends meet until you’re able to return to work.
It’s tempting to cross your fingers and hope misfortune skips over you. But when you look at the facts, it’s easy to see: getting proper coverage against life’s risks is not just important, but a bargain in disguise.