Learning to decide Insurance purchases for yourself
There are many financial consultants, financial planners and insurance agents around recommending this and that financial products for you to buy. Sometimes, it can get confusing on the type, amount of coverage and how much premiums per year, coupled with many fine prints and conditions for claiming payouts should a need arises.
Each insurance type provides protection for different unfortunate events. The first thing is to learn what are all the unfortunate events that can befall on most average people so as to determine type of insurance to buy for an average person.
Before insurance companies introduce a product that provides cover for some unfortunate events and respective amount of coverage/premiums for that, their actuaries have calculate premiums that will be profitable for the products that they sell.
In the same way, insurance purchases for yourself are also determined by thinking like an actuary.
The de facto rule in deciding insurance purchases is when the risk of unfortunate event is too costly to self-insure.
For example, there is no need for both Bill Gates and Warren Buffett to buy any insurance for any unfortunate events. I supposed up till now, there is not any critical illness that can bankrupt or make a large dent on their net worth.
In other words, there is no need to buy any insurance if the benefits of it are too small to have any significant impact on your life. This is well illustrated in a personal computer purchase. Take the example of a laptop purchase, if carry in warranty costs much less than on site warranty, then there is no need for you to subscribe to on site warranty as it is relatively easy and convenient to bring the faulty laptop to a repair centre. As for the case of a desktop, it depends on whether have own transport and where is the repair centre. Nevertheless, a three years warranty on parts and labor is more than enough for the case of personal computer. First is that after the three years warranty, parts that fail like mouse, keyboard, monitor and memory can be easily replaced with a new one on your own and prices for them fall by the day. Second is that personal computers are some relatively inexpensive items nowadays such that longer than three years warranty are not economically justified.
Clearly enough, for people living in Singapore and United States, adequate health insurance coverage for common critical illnesses is a must as the medical costs can bankrupt an otherwise middle class and below individuals and families.
Related posts:
