Here are 3 absolutely true but not so obvious reasons why insurance is so important:
1. Life is Unpredictable
“There is nothing more certain in life than death. There is nothing more uncertain than the timing and place of death.”
It is not death that creates the problem, it is the uncertainty. Life is a great drama but unlike the drama we watch on television, the drama of the real world do not have a predetermined ending. This is part of the reason why life is so interesting and exciting. However, an exhilarating journey need not be a reckless journey and this is where life insurance is necessary to provide that balance.
2. Human Life Value
“If you were disabled in a car accident and someone was responsible, how much will you sue him for?
If you were disabled in a car accident and no one was responsible, how much insurance do you have?”
A life insurance policy is a contract. It is a contract for a sum of money and there is a logical reason to have that sum of money. The reason is that there is an economic value on our life.
The formula is like this:
Annual Income x No of years expected to work = Human Life Value
This is not a make belief concept. This is a concept used by the courts (the legal one, not the furniture and appliances one) to ascertain the value of the loss of a life or in some cases, inheritance.
Spend a minute to calculate your value and ask yourself, how much of this value are you insured for?
3. Inverse Gamble
The difference between insurance and gambling is this:
Insurance is to protect something you already own.
Gambling is to try and win something you wish you own”
How about making a bet that if you win, you win and if you lose, you win! Need me to repeat that again? Buying life insurance is not a gamble but because there is element of chance that something may go wrong to trigger an insurance claim, it is sometimes misunderstood as making a bet against one’s own mortality.
If ever the purchase of a life insurance policy is regarded as a gamble, than this is a good gamble to take. If you lose and never have to make a claim, it means good health and a long life. If you “win” and have to make a claim, you have protected what you would have loss through future earnings.
It is an inverse gamble, the type of gamble that you play to lose for all the right reasons.