Life is full of options and possibilities, many of which are predictable, such as the how’s, when’s and what’s of the day to day. However, it’s the “what ifs”, those unexpected events over which we have no control, that we need to plan for as best we can. That’s where insurance comes in. But apart from the peace of mind that comes from properly insuring our lives and lifestyles, the fact of the matter is that, from a purely financial standpoint, having insurance is a sound investment.
While
auto insurance and other insurance is mandatory and for good reason, here are some elective insurance plans that should be a part of any investment portfolio.
Whole Life Insurance: Obviously, if you are married or have young children the main benefit of taking out a whole life policy on yourself is the peace of mind of knowing your loved ones will be provided for in the event of your untimely death. But if you remove death from the equation and look at a whole life policy from a purely financial perspective, one of the best things you can do for a spouse or young child is to purchase additional whole life policies for them. Unlike term life insurance which is subject to renewals and rate changes throughout life, the rate of a whole life policy does not change over time. Plus, it accrues interest. Buying a baby or young child a whole life policy is one of the best ways to invest in their future. Not only are the rates very reasonable, a whole life policy will mature as the child matures without the gradual reduction in benefits that most of us experience with term life insurance policies as we age. Once children reach adulthood they can decide whether to borrow from the policy to pay for college or other necessary expenses, or continue making the modest payments as a means of ensuring that the members of their own new families are provided for. Chances are, if you buy whole life policies for your children they will do the same for theirs, thus you’ll be passing on an appreciation for the value of money and the power of compounded interest.
Personal Health insurance: As more and more employers are responding to the ever growing costs of health insurance by placing a greater portion of the premium burdens on their employees—a trend that will only continue until employees are paying the entire cost of their coverage—it is critical, especially for young people, to start considering the purchase of independent health insurance while they are still young and healthy. Why pay high premiums for comprehensive health coverage when all you really need is to make sure you’re covered in the case of an unlikely catastrophic illness? Cut out prescription drug coverage and save even more, allowing you to redirect the money you save on premiums into interest bearing savings.
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Disability Insurance: An often overlooked but critical way to stay financially solvent in the event of an injury or illness that takes you off work is to purchase a disability policy to supplement what you might receive via state disability, which is often a fraction of your income. Again, if you are young—less than 35—and in good health, these policies can be purchased with very reasonable premiums, especially in light of the fact that they can actually allow you to receive a level of income while off work that is equal to what you would be making if you were still able to work. An even bigger financial benefit can be realized if you redirect the money you would be spending daily if you were working, such as money for gas, into a savings account.
Long Term Care Insurance: Just as the thought of purchasing our own life insurance can be uncomfortable—since by doing so we are admitting that we have an expiration date—the thought of becoming old and infirm also prevents many from looking into one of the most financially solid investments they could ever make, namely long-term care insurance. Like most insurance plans involving health, the younger and healthier you are the cheaper the premiums will be. With the first wave of baby boomers now reaching 65, threatening to overwhelm the Medicare system and send health care costs skyrocketing at an alarming rate, the time to purchase long term care insurance is now, especially if you are over 40, which is the minimum age of eligibility set by the insurance companies. If steps are not taken to insure the integrity of personal assets through supplemental long-term care insurance, the fortunes of the elderly will decline at a rate that far exceeds their ability to meet their health care needs, and the burden of payment will fall upon family members. The prudent purchase of a long term care insurance package could prove to be financially beneficial for generations to come.