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Agent:
"We should do a review. Your salary is higher now. You should need bigger insurance coverage."
This was what one of my insurance agents said to me many years ago.
I was wondering why did she say something like that.
Wasn't I financially more secure by then? Why would I need to increase my insurance coverage?
Agent:
"You are worth more now. Your life is more valuable. It is like insuring a valuable piece of art. More valuable the artwork, the higher the coverage."
OK, at that point, I think most people would have just bought into the argument.
I didn't.
I decided that the agent was only interested in lining her own pockets with more of my money.
Read this conversation I had with a fellow blogger on the need to buy insurance and how this need correctly changes with our circumstances.
AK:
We should look left and right before crossing the road. In some instances, we should look back as well to make sure we are not in the way of some speeding motorized scooters.
Risks have to be managed and having insurance helps to manage risks.
Since we are talking about risks, actually, insurance companies could go bust too. What then? OK, I am being a little perverse. ;p
So, even if we have insurance, it is still important to have a meaningful emergency fund and I do maintain a very large emergency fund well beyond the 12 to 24 months of recurring expenses that I usually suggest.
The need for certain insurance products in life diminishes if we have a large enough emergency fund as well.
Insurance is most relevant when we want to transfer risks which could result in catastrophic financial losses or hardship.
So, we have to insure ourselves against events which we or our loved ones might find hard to cope with on our own.
The financial ability to cope will, of course, differ from person to person and from family to family.
la papillion:
I think it's a important to know that everything we do runs a risk. Even if we buy insurance, it's also possible for the company to close down, as u had mentioned. (that's why don't buy all your policies from one single company).
That's not the only risk of buying insurance. These days, even if u bought a plan, u might not be able to claim because of some disclaimers laid out but u didn't know about.
So, I agree that we should progressively take the risk ourselves as our financial situation improves.
When we just started working, the insurer should bear a big part of the risk because we don't have the means to shoulder the risk. It should be inverted when our situation improves.
Don't think of ourselves as a valuable piece of art that needs insurance coverage.
We should become more valuable as a person because our wealth has grown.
As we become wealthier, we shouldn't need to have more insurance coverage.
How to become wealthier?
What?
Make more money and buy more stuff that we need to buy insurance for?
OK, maybe, I will ask that insurance agent who said I was a valuable piece of art to give you a call.
Related posts:
1. Emergency fund.
2. Best insurance.
3. Become wealthier.
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