Insurance is something people buy and tend to forget about. The policy papers are filed, the premiums are paid on time and life goes on. It’s one of those things you tend to forget about until something random reminds you why it’s there in the first place.
A trip to the hospital, a car accident or a natural disaster that destroys your home can leave you under financial strain overnight. There is no insurance policy to cover you in these events, but the right insurance can remove a lot of the pain from the situation.
Insurance is an important part of financial planning—not because we expect bad things to happen, but because planning for the uncertain often makes more financial sense than reacting to it.
Insurance purpose
Insurance is, at its heart, a way to protect you from financial risk.
When you have an insurance provider, policyholders share the risk of an unexpected event so they don’t have to pay the total cost themselves. The insurer provides cover in return for the payment of a premium and will pay out if an insured event occurs.
It is like a financial safety net. Most people hope they never need it but if things change unexpectedly having it in place can go a long way.
Importance of Insurance
Even the best budget can be blown away by unexpected costs.
Medical bills, car repairs, property damage or losing a family member’s primary source of income can add up quickly. When these events happen, people often have to dip into savings, take on debt or delay important financial goals, without enough financial protection.
“Insurance can help alleviate some of that burden by covering qualifying costs, providing families and businesses with more financial security as they rebuild.”
“It’s not so much about replacing money, but protecting what’s been built up over time.”
All insurance policies are not alike.
Insurance is not a cookie-cutter product. Different policies cover different parts of life.
Health insurance controls the costs of health care.
Life insurance provides financial protection for your loved ones in the event of tragedy.
Motor insurance covers the cost of repairs and liability to third parties.
Home insurance is a protection for one of the most expensive possessions that most people will ever own.
“Travel insurance protects you from things that can go wrong on your travels, from medical emergencies to cancelled trips.”
What policy is best for you will depend on your individual circumstances, commitments and future financial goals.
Thinking outside the premium
It’s a common mistake for people to look only at the amount of the premium.
A cheaper premium may be attractive at first but it may not be the type of coverage that you need.
Also be sure to note coverage limits, exclusions, waiting periods, claim procedures and any additional benefits. Sometimes a little more money for a wider coverage can give a lot more value in the longer run.
Do your homework – the cheapest insurance isn’t always the best deal.
The importance of reviewing your coverage
Money does not tend to stay put.
A policy bought years ago may not provide the same protection today. Life’s changes such as buying a house, getting married, having a baby or starting a business often mean your insurance needs change.
Review existing policies periodically every few years to ensure coverage matches current responsibilities and future plans.
Insurance Misconceptions
Many people put off getting insurance because they think they don’t need it yet.
Some feel they are too young for health coverage to be relevant or that insurance only makes sense if you ever make a claim.
Insurance is about preparing for problems before they happen, not after. Get financial protection before you need it. By then it might be too late for the right coverage.
Better insurance options
Insurance selection is not hard.
More time spent reviewing policies, understanding the terms and assessing personal finance needs can lead to better long-term decisions.
Here are some questions to ponder:
>What are the financial risks that need to be covered?
>Is there enough coverage?
>What the policy does not cover
>How simple is it to make a claim?
>Will there be enough coverage in a few years time.
Often these are more important than the premium itself.
Summary
Insurance is not just a financial product, it is about protecting your long term future. None know what the future will bring. But perhaps one of the most useful things anyone can do is prepare for the unknown.
The correct insurance policy is not only a safety net for unexpected costs. It helps you reach your financial goals, protects your savings and gives you peace of mind knowing financial trouble doesn’t have to equal hard times.
The right decision on insurance, like any financial decision, is an informed decision, not a hasty decision. It’s worth taking the time today to know your options so tomorrow when you need them it could be a world of difference.”
