A few reasons why you might buy Insurance:
A few character traits of mine, I like to problem solve, I care about those close to me and I regularly offer unsolicited advice.
Sometimes I take for granted that not everyone thinks the same way I do – hence the unsolicited advice can come across too strong. But when it comes to areas of interest or expertise (like insurance), I tend to have strong opinions or advice.
Does this sound familiar?
Does it sound like another loved one in your family?
For me it sounds like my father, strong minded, super smart, knows a lot about everything, but delivery could be slightly improved (ha ha – as a young father I am happy to be like my father).
However, I am trying to be self-aware and improve, so rather than say this is why you need insurance, here are a few reasons why I might buy Insurance (but you need to figure out the reasons why you might buy insurance).
Mandatory to carry the state minimum auto insurance. This is controlled at the state level. These rules are from compulsory car insurance laws, in effect creating a solution to help cover the costs of at-fault drivers so they wouldn’t default on their payouts. Since then, nearly every state has enacted mandatory car insurance liability laws. (Another example, is if you own a business and workers compensation is a statutorily required coverage.)
Protecting the damage to your own car isn’t mandatory. Liability insurance, on the other hand, is almost always mandatory because it helps protect other people and their property. The thinking is that other people — shouldn’t suffer as a result of at-fault drivers not being able compensate others for losses incurred. This is a pretty good set of laws.
Required. In order to purchase a home with a mortgage, your lender will require Homeowners Insurance in order to protect the property (especially since they are a majority owner in earlier years). Insurances required as part of doing business or in an effort to lower risk in transactions are a great tool for risk management. Although not required by law, certainly are great products. Or have enough cash to buy your home outright. Then you might have other issues (like what island to visit to spend all your $). Another example, is a business contract requires you to cover liability insurance in the event of an accident on the job.
Peace of Mind (note: all Insurance products are for Peace of Mind). These include Life Insurance, Umbrella Insurance, Travel Insurance, etc. those products that help you go to bed knowing, that if something bad happens – you are covered. It was your decision to buy and that peace of mind that it provides helps.
I know if something bad happens to me, my family is okay. Or I don’t lose my home over a major accident. These types of things are what help me focus on things I enjoy or are committed to: my career growth, family, fitness, and financial freedom goals.
Given the size of a $500k-$1m loss relative to my current Net worth, it only makes sense to insure easily insurable risks.
Without these peace of mind products I might have more stress or be deterred from the freedoms I want. Most insurance products are customized insurance products. Taking the time to learn about these products/coverages or get solid advice from an insurance professional are the only two approaches. Getting advice from a loved one is great, but still do your research or ask an expert.
As a Millennial Shark, these are some examples of a few reasons why I might buy Insurance, but how about you?
You could be in different lifestyle entirely, renting apartment, traveling the world, no kids/family, and no car – Uber rides everywhere. You have different risks and different needs. Exactly why this isn’t a one size fits all world. That’s fine, then you need to adjust your thinking to understand – what are my risks?
Ask yourself: Do I have any mandatory insurance needs, required, and/or where will I get the most peace of mind? Also, good question to follow up is how much does it cost for peace of mind?
Comment below with reasons or questions about your own lifestyle.