Why Do I Need Insurance?

One of the most common questions advisers can ask is "Why Do I Need Insurance?"

Textbook answers aside, let's all face it. There are uncertainties in life.

We would all love to be able to own our dream home, dream car, go for as many holidays as we like and do all the things we would like to do. However, this often rests on the some critical assumptions:

1) You have a lot of spare cash or

2) You are able and working to provide for your family and yourself.

For most people, option 1 comes about from investment gains and savings which will still bring one back to option 2. Lottery gains aside, many of the things we want need money which is often obtained by working for it. Thus, many things are possible when you are able.

Let's make some changes to that assumption.

Let's just say one day on dream holiday trip, you, a successful sales executive, meet with a major accident that renders you unable to move around freely to continue with the career that you have spent huge amount of time and money investing into to build up. The following questions will likely occur:

Am I able to pay for the hospital bills that have resulted from the surgeries and hospital stays?

With my loss of freedom of movement, will I be able to work to ensure I still have income?

If I can't continue in the same job, will I be able to find employment that ensures the same amount of income that I currently enjoy?

Do I or my family have enough money to pay for our daily needs and children's education fees from now on?

Will I be requiring professional medical care as well as long term nursing assistance which will translate into long term medical bills?

In the event an unforseen illness or accident should occur, it is often not just the immediate cash needs one need to worry about. It is often the long term financial requirements, impact and loss of income that one needs to consider about as well.

Unlikely? Think again.

A recent case I heard of was a successful self employed designer who suffered a stroke attack in his early 30s. This rendered him unable to continue with his business. Early thyroid problems had prevented him from being insured. This meant the savings he had from his business which is now defunct were all wiped out due to treatment requirements. He is currently looking for secondary employment which would likely not be able to pay him his previous salary and his future income would look very uncertain as well.

It would be advisable for one to speak with a qualified adviser who would be able to advise on how one can best provide for life's uncertainties and how the wide universe of insurance products can be best used for one's benefit.

Health Insurance = Life Insurance ?

In my course of work, I have often come across clients who claim they have insurance. It is the first intuitive response of most people to say this when they meet an adviser. When probed more closely, it is often not surprising to find that most do not have an idea of what they are covered for.

One of the most common misconceptions people have is to think that life insurance will cover hospital bills. Yes it is possible to use some of the money one receives from a life insurance claim to pay for your hospital bills but what happens if one should admit into the hospital and does not qualify for a life insurance claim?

This is a recent case I dealt with. Mr Q had always thought he had himself covered for hospital bills as he had clearly instructed his agent to prepare a policy to cover this aspect besides his normal life insurance. Mr Q deserves praise for taking active steps to ensure he is protected against hospitalisation risk.

However, it turns out Mr Q only had two life insurance policies in the end. One of the policies had a small sum of medical reimbursement of $5,000. In today's day and age, $5,000 can hardly be considered sufficient for a surgery.

This meant that unless Mr Q should pass on or be struck with total and permanent disability or one of the 30 critical illnesses, Mr Q would NOT be able to claim hospital expenses. The only exception was if he met with an accident which would pay $5,000 from the medical reimbursement aspect.

There are many types of insurance meant for different purposes. Health insurance is meant specifically to provide for medical bills while life insurance is meant to provide for sudden loss of income, legacy and other monetary requirements in event of unfortunate circumstances.

It is greatly advisable for one to ensure that one has not only sufficient, but also the RIGHT insurance to avoid any rude shocks when one should need protection the most.