The Need For Insurance Policy And The Only Two Situations You Don’t
Insurance might be the most morbid part of personal finance, but it’s also one of the most important. No one likes to think about dying. But if you have anyone relying on your income, it’s imperative to plan for every worst-case scenario.
To make sure your loved ones have enough money to keep their home, put food on the table, and get back on their feet if you pass unexpectedly, you should get insurance.
Do I need insurance?
If you are a primary income earner or primary caregiver in your household, you should consider insurance. The best kind of insurance for most people is term insurance. This type of insurance gives most people a very large death benefit for a low monthly payment.
But just because you are not married with kids doesn’t mean you shouldn’t get insurance. If you ever plan to have a family, getting insurance now is a good idea. The cost of insurance goes up with age, so the cheapest it will ever be for you is likely right now. Once you start paying for your term insurance policy, the monthly cost is locked in for the entire term.
There are two main situations where you might not need insurance. The first is if you never plan to have any dependents. And that doesn’t just mean kids. If your aging parents might end up living with you in the future, they could be considered dependents. If you are a primary income-earning spouse, your partner may also be a dependent. The financial security of those who depend on you is very important, even if you’re no longer around.
The second scenario where you might consider skipping insurance is if you have enough savings and investments to self-insure. That means you have enough money that your family would be fine even if your income stopped right away. But don’t underestimate that number.
It is very likely that at least you or your spouse will live into your 90s. Even if one of you is no longer around, the cost of healthcare and retirement that could last 30 years or longer are major expenses. Staying in your home, covering the bills, and paying for future medical expenses should all be factored into a decision about insurance.
Some households decide to add extra insurance coverage to pay for things like college, paying off a mortgage, and other major planned expenses.
Do I have the right insurance?
Even if you get insurance from your employer already, that may not be enough. Group insurance from work is often a great deal and a benefit worth taking advantage of. But if you leave your job, group insurance doesn’t typically follow you.
If you become self-employed or move to a company that doesn’t give you an insurance option, you might have to pay a lot more than you would today for insurance on your own.
For some people with a high income, whole insurance or universal insurance could make sense. But for most people, the best kind of insurance to get on your own is term insurance.
If you don’t have your insurance policy and might need one in the future, the best choice is to sign up and lock in your lowest possible rate today. You can always cancel in the future, but you can’t go back and get a policy at a lower rate after waiting for five or 10 years.
Do you need insurance? If in doubt, the answer is usually yes.