Updated: Nov 1, 2019
Insurance used to be a topic that made people feel uncomfortable. Stories of ‘evil’ insurance corporations which only give menial pay-outs are not unfamiliar. It has made people wary and concerned about purchasing insurance. However, with increasing education and affluence, many are starting to accept it and understand that insurance, is in fact, a basic necessity.
Instead of looking at the milestone insurance plans you need to get, or which is the cheapest insurance policy you can get, the better approach is to discover what your real need is.
1. Do you need insurance?
Is there something keeping you up at night? Specifically, what are some of the concerns that you have right now, of you foresee you will have in the next 5 to 10 years? For example, are you concerned about starting a family, new investments, aging parents, etc? These concerns are legitimate. Usually, there are policies that may give you peace of mind.
We need to be aware and accept that many things in life require a hand in risk management. Sometimes, insurance can do wonders and be the solution to many of the problems we potentially face.
2. How do you decide which one to get?
A. Try to keep an open mind
Learn to challenge the myths about buying insurance. Maybe you have heard from some that you only need health insurance. But perhaps you should consider that health insurance does not cover other important costs such as tonic and organic food for recovery, as well as any decrease in your income.
Maybe you've also heard: “you only need insurance when your kids are young”. But is this still true? With the emergence of wealth and globalization, we are increasingly deploying their assets globally. When that happens, we ought to consider potential liabilities that might affect us and/or our family's assets.
Avoid letting the opinions or decisions of others influence you. Are you at peace with what you have, or is there residual worry? Remember that people are complex and we all have different concerns.
B. Try to balance your wealth strategies with security
Is your current wealth strategy balanced? Do you have alternative plans in the event that it falls short? For example, it always sounds sexy to “buy term invest the rest”. However, we ought to have a Plan B in the event that the investment(s) do not deliver as expected, or if our health deteriorates with age.
In evaluating the suitability of the policy, we will have to look at its pros and cons. Ask yourself if you are willing to undertake the cons, if you have to, within the next 10 years? More importantly, can you afford to do so?
On top of everything, it is worth remembering that one man’s poison is another man’s cure. As individuals, we have our own goals and concerns in life. Like everything else, insurance is merely a tool and its significance and importance are entirely subjective and up to us alone. I hope this helps.
If you wish to find out more about financial planning and management, click here. I'll be happy to discuss this with you over a cup of coffee.