The Practical Features of Insurance are vast and varied. Life and Health Insurance are used in providing death benefits, insuring the continuation of a business, funding college, funding retirement. Also, for covering the loss of a highly valued manager or owner of a business. Supplemental Insurance is also valuable for filling in the gaps in your current medical coverage. Medicare Supplements are valuable for filling in the gaps in your Medicare coverage. This is just a sampling of the vast array of uses for insurance coverage. I don’t have enough time or words to fully describe each type of coverage. So, I’ll just provide a few scenarios in which the absence of coverage can be financially and emotionally disastrous.
The Practical Features of Insurance Scenario 1
Bob and Betty had a little girl. She was beautiful and healthy. Bob and Betty brought the child home after a two-day hospital stay. The entire family was excited and the parents of both Bob and Betty doted over their precious grandchild. Then about 3 months after their precious little girl was born, she suddenly died in her sleep of Crib Death Syndrome.
Bob and Betty never thought about getting a life insurance policy on their healthy new daughter. Now they have the death of their precious child, the cost of a funeral as well as the funeral arrangements to worry over. Bob and Betty were just starting their life together and had a grand total of $500 in the bank. So how were they going to pay for the funeral? Their parents might help if they have the money. They could take out a loan or make an arrangement for monthly payments to the funeral home. But is that the best choice?
The average funeral for an adult is a little over $10,000 and a child’s funerals are a little less. The cost of a $10,000 Final Expenses Life insurance plan for a newborn is as little as $4 per month. So if the child dies after 3 months Bob and Betty will have paid $12. But they receive a $10,000 death benefit to pay for their daughter’s funeral expenses. They have avoided the headache of having to figure out how they’re going to fund the funeral and they can also start planning the funeral with financial peace of mind.
The Practical Features of Insurance Scenario 2
You’re 45 years old and making great money as a self-employed contractor. The only problem is you haven’t saved a penny for your retirement. So you decide that you want to retire at age 65. How are you going to fund your retirement? You might try putting money in a savings account, but it earns next to nothing in interest. Or, you could choose CDs or Treasury Bonds. You could throw all your life savings into a 401K and pray the stock market doesn’t crash. Another option could be a single premium Whole Life insurance plan, a Universal Life Plan or an Annuity. The insurance-based plans I just mentioned hold additional benefits. So, what are some of those benefits?
The life insurance comes with a built-in death benefit, just in case you don’t make it to retirement. There are also tax advantages. You get steady predictable cash value accumulation. Your money is also not at risk if the stock market crashes because of the guaranteed accumulation rate. Both the Universal Life and Annuity can be set up to start paying you a specific amount starting at a specific age and still keep the death benefit intact for when you die.
The Practical Features of Insurance
I could go on and on with innumerable scenarios, but I’ll stop here. Insurance can solve many problems. People fail to get insurance because they fail to see the value. They see money going out, but experience no gratification from it. For instance, if you buy a meal, you can enjoy the flavor and satisfaction of being full. If you buy a car, you can also experience it’s worth it as you drive it. Insurance takes a little imagination and trust. You have to understand the value. Then you have to be able to visualize the catastrophic consequences of not having insurance. You also have to be able to think long term versus short term. No matter how you slice it, insurance is important.
