On the surface, insurance sounds straightforward: it pays out a certain sum to your beneficiaries upon the triggering of certain events. Insurance is actually a little bit more complicated than that. Did you believe in any of these myths?
No Dependents, No Need for Insurance
Ah, the beauty of being single. The lack of dependents or your own family to support does make many financial aspects easier, but the implications of your unexpected incidents actually reaches further than that. For example, someone has to pay for your personal debts, funeral costs, and maybe also your medical bills if you pass away, and those unpaid expenses will end up being slapped onto your family (parents or siblings) or executor instead. Why cause them additional grief when you can help them instead?
Employer-Provided Insurance is Enough
Some employers provide benefits such as life insurance or medical insurance. You might think that this is coverage enough for you. This myth is a little subjective. For a single person with moderate spending habits and debts, the insurance coverage that your company provides you might be enough. Again, your dependents are the key deciding factor here, because a high number of dependents would mean that more people will be left financially vulnerable upon your inability to work or sickness. You will also have to remember that any insurance coverage provided by your company terminates when you resign, so you’re actually not permanently insured.
Insurance is a Must
Contrary to popular belief, insurance is not strictly necessary. While it is true that insurance will greatly benefit a large part of the population, individuals who are financially well-off with no debt or dependents may not need insurance at all. If you are confident that the assets you have in your name are sufficient to cover the cost of your accident, illness, disability, or death, and support your dependents for a comfortable period of time, you may actually be able to go without insurance at all.
Life Insurance is for Breadwinners
Since insurance disburses financial payouts, you might have mistakenly come to the conclusion that it is only important to insure the life of your family’s breadwinner. This isn’t true. Breadwinners may earn the money that puts food on the table, but have you ever thought about the costs you’ve avoided by having a home-maker partner who cooks said food for your table, takes care of your children, and cleans your house? As such, the death of a home-maker has financial costs that lend life insurance for home-makers some weighty consideration.
Investing Over Insuring
Insurance requires you to pay a premium every year, while investing actually grows your assets if you do it right, so investing your money is better, right? Not really. Again, if you’re financially well-off, or have few to no dependents or debts, investing your additional cash is possible. Besides those scenarios, you’re actually betting on the chance that you’ll accumulate enough value in your investments to cover your costs and support your dependents before anything bad befalls you. They will be left financially vulnerable if you fail to achieve a comfortable self-insurance margin before anything unfortunate befalls you, since all debts and costs will deplete your assets before your dependents get the leftovers.