Insurance is the topic near and dear to me. The conversations about risk management and insurance were one of the things that lead me to start the Financial Witch Project, and I cannot stress enough how important it is to have protection from all kinds of unexpected and unwanted circumstances, as well as different types of losses. My rule of thumb always is, If you can get insurance for something, do it. No exceptions, no excuses.
The problem with insurance is the same as the problem with financial planning and investment advice: the people who need it the most think they cannot afford it (or at least think so). This is a recurring conversation I have with my friends who have small children.
“Now, you have two (or three) people dependant on you. Have you bought life insurance?” I ask them.
They reply, “Of course not! I cannot afford it.” It breaks my heart because knowing what I know there is no way these people can afford NOT to have insurance. If they cannot afford whole life insurance or think it’s too expensive or unnecessary at this point, they should get term insurance for the number of years until their youngest child reaches the age of majority which is usually 18.
These are some difficult conversations to have with friends and clients alike. People are uncomfortable to think and talk about death, especially young parents who have just had their first child or children. As much as we want to live forever, we all know that, unfortunately, it’s impossible. We don’t know when we die, but it’s our responsibility in case this happens sooner rather than later to protect our loved ones and to make sure they are provided for.
If you think that you cannot afford life insurance, go through your budget and see if you can decrease or eliminate some variable expenses until you can. If this is not the case, see if you can cut down on your fixed expenses without sacrificing much of your lifestyle. Move to a cheaper place, eat out less, instead of travelling twice a year, travel once a year, or instead of having two cars, have one. If none of the above is an option, get a better paying job, a second job, or start your own business. Please do something because your loved ones are the most important thing that you have in your life. You insure your home, your car, and your driver’s liability, and they are nowhere near as important as making sure your loved ones are provided for in case something happens to you.
I plan to talk more in-depth about insurance in the future. However, here is my most recent experience when I was fortunate to have bought the insurance.
This example is nowhere near as dramatic regarding the consequences, but it can still be used to illustrate the point. I had my MacBook Pro for two weeks when my demon-kitten decided that it needed to take a bath. She was jumping around, and usually, she is very careful, but this time she didn’t calculate her trajectory well. My kitten jumped, tumbled a big mug of tea on my brand new laptop, and it was drenched. The kitten was ok which was the most important thing to me. The tea wasn’t too hot to harm her. Though, my MacBook was a whole different story. I was very upset. The only saving grace was that I always buy insurance for my Apple products, and I had Apple Care Plus for my laptop. The liquid damage cost me $129 CAD + tax to repair with insurance plus two weeks without the computer while it was being fixed. If I hadn’t had the coverage, repairing it would have cost the same as buying a new one. Also, as much as I love all things Apple, I’m not ready to spend $2.0K-$2.5K CAD every two weeks on a new laptop.