Today we have a guest post on insurance from Jennifer Jaime. Jennifer is a CPA from Texas and recently started her blog DontSaveForRetirement.net. As you can tell from her blog name, Jennifer offers a unique perspective on personal finance!
Keep reading below to learn athe most common insurance myths people fall for.
Top 3 Insurance Myths
Everyone needs insurance. Young or old, and somewhere in between we all need insurance. Insurance is something people buy to protect themselves from losing money. It protects your money from disastrous events so you don’t have to pay huge amounts of money out of pocket. Disastrous events can include job loss, car accident, injury, illness, fire, theft and natural events such as hurricanes and tornadoes.
There are a lot of myths around insurance. I hear a lot of grumbling when it comes to insurance.
Myth #1 – Insurance costs too much money.
Truth #1 – It is true that insurance does cost money; however, it is less expensive to pay a premium each month than it is to pay a large sum of money in the event of a disastrous event. The cost of paying out of pocket for any disastrous event can cripple you financially. I have heard many stories of families who had a medical event happen and it took a long time for them to recover financially. Yes, you may pay out of pocket each month but it is worth the minimal cost in comparison to the out of pocket costs if you had no insurance coverage.
Myth #2 – I don’t need insurance, I am fine.
Truth #2 – We don’t know what the future holds. The good part is we also don’t have to try to figure it out. All we have to do is our part to prepare ourselves for the “what ifs” in life. While you may not need it today, you may in the future. Keep the focus on your financial goals, such as savings and getting out of debt, and let insurance be a thing you do to meet the unknowns in life. You will never know when you will need it – so get it and forget it.
Myth #3 – Insurance companies are evil.
Truth #3 – Insurance companies are a means to an end – they give us the products we need. Yes, it is true that insurance companies make a lot of money and you may never recoup those costs. However, just because insurance companies are profitable from all the premiums they collect, doesn’t mean they are evil. If we focus on the profit of insurance companies, we are missing the point. The point is not whether insurance companies are evil, the point is we need to cover ourselves financially and they provide a product to handle our claims. In a beautiful world, you would be self-insured and have enough money in the bank to pay all the out of pocket costs for any disastrous events. If you aren’t self-insured, then insurance companies are there to meet the need.
Must have insurance coverages:
Below are a few insurance coverages that are a must have for everyone.
Health Insurance –There are lots of changes going on with healthcare right now and I recommend you research the best plans to cover you in the event of an illness.
Life – Term life insurance is important to protect you and your family’s wealth. I recommend you get coverage 10x your annual salary.
Cars – Get full coverage if you don’t have money in the bank to cover all losses for “at fault” accidents.
Home – If you rent, get renter’s insurance to cover all your contents in case of a disastrous event, such as a fire. If you have enough money in savings to replace all your furniture and appliances, then you are self-insured and renter’s insurance is not needed. For your home, if you carry a mortgage, most lenders require you to provide coverage. Even if you are not required, a homeowner’s policy is needed to protect your wealth.
Work – If your work offers disability insurance, get the policy since it covers your income in the case of an event that keeps you from being able to work.
The biggest takeaway is to get insurance in all areas of your life – health, life, cars, home & work. Avoid the insurance myths and get the coverage you need to protect your money.
About the Author
Jennifer Jaime is a CPA and Money Coach based in Austin, TX. She loves sweet tea, her family and walking her two crazy dogs, Walter & Sissy. Financial literacy is her passion and loves every opportunity to share the message of hope. Follow her on Twitter @jennjaime1 or her blog, www.dontsaveforretirement.net.