Insurance - Do I Actually Need It?
5 min read
Can you put a price on peace of mind?
Risk. We dabble in it every day without realising it. Every time you leave your house, get in your car, catch a flight, chew on peanuts, you’re taking a risk. It’s an unavoidable part of life for all of us and, for the most part, we take it on because the benefits outweigh the risks.
But taking our chances and hoping for the best doesn’t always work out in our favour. In many instances, the risk is larger, heftier, and packs more of a punch. What do we do then? Leaving things to chance is an option but, the larger the risk, the more it can weigh on our minds and have very real consequences.
So what else can we do if playing the odds with Madame Fortune isn’t an option? Well, we can manage and mitigate that risk.
Welcome to the world of insurance.
For most of us, we regard insurance and insurance salespeople with one heavily raised eyebrow. Do I really need it? That’s a very valid question, especially when our hard-earned paychecks are already stretched so thin thanks to the rising cost of goods and tough economic times.
Let’s dive into insurance today – the good, the bad, and the bare facts.
Insurance in a Nutshell
When you buy insurance you make monthly payments to the insurance company called premiums. In return, the company agrees to cover you for a certain risk. You and the insurance company work together to agree how much you will pay and how much they will pay if an accident happens and you need to claim, known as excess payments.
That’s insurance in a nutshell. Generally, the higher your monthly premiums, the lower excess you’ll need to pay in the event of an emergency.
Do I Actually Need Insurance?
Let’s get this question out of the way first. No, you don’t technically need insurance in the same way that you need food and shelter to survive.
But – and this is a big but – that doesn’t mean insurance isn’t important. It is.
One thing we know about life is that it’s unpredictable. An emergency or unexpected situation could leave you with a bill in your lap that’s larger than your entire life savings, and months, maybe years, of hard work could be gone in seconds.
That’s a big risk that you’re shouldering by yourself with no help.
This is why insurance is important – you’re essentially sharing the risk – and its consequences – with a third party. Insurance is financial protection that you get by transferring your risk to an insurance company via a contract.
The Benefits of Insurance
We never enjoy parting with our money if we don’t see the immediate benefits, so it’s totally understandable to think that there might be no benefit in paying insurance. But if your goal is to save money, invest for the future or have financial freedom, one accident or emergency could throw all your plans in jeopardy.
We often subscribe to the “it won’t happen to me” notion, but the truth is, it could happen to anyone. Insurance gives you a measure of protection and financial security for you and your family. It doesn’t just help to manage risk. It offers us peace of mind.
To err is human. But if we’re going to err, it’s better to err on the side of caution than disaster.
Different Types of Insurance
To be clear, we’re not suggesting that you go and purchase every insurance plan out there. Everyone’s unique and your circumstances, family, lifestyle and employment status can help you determine what kind of insurance you’d benefit from.
Here’s a quick breakdown of some of the most common insurance policies out there:
Having a car means there’s a chance you’ll crash it, or someone will crash into it for you. Either way, it’s not fun having to deal with the accident and repair bills. Most people either get third-party car insurance (where only the other person’s car is covered in an accident) or comprehensive insurance (both your and the other person’s car will be covered).
Also known as medical aid, health insurance comes in many forms. Some medical aid plans only cover hospital costs (if you get into an accident or are injured) and others cover doctor’s visits, medications, unexpected illnesses and so on. In some cases, if you work with a company, they may subsidise your medical aid, so make sure you’ve double-checked if you’re already partly covered before buying any medical aid plans.
Home is where the heart is, but it’s also where a lot of other valuable things are too, like laptops, iPads, expensive jewellery, etc. Home insurance protects your house against damage, theft and accidents like flooding. Depending on your living situation, home insurance might be a necessity or it might be unnecessary.
Ouch. None of us really want to think about what happens after we’re gone, but if we have a family or kids, it becomes more important. Life insurance can cover you, in the event of death, hospitalisation, or serious illness, and ensure your family is financially covered if you can’t provide for them anymore.
Again, worst-case-scenario thinking is never fun. If ever (heaven forbid) you’re unable to do your job because of an accident or illness that leaves you with a disability, disability insurance can help to cover and support your monthly income.
This will only apply to you if you own a business. If you own a business, it’s a good idea to protect it against risks or damages that could hurt your revenue. Things you’ll want to cover include your equipment, tools, trucks and vans etc.
If you’re lucky enough to get to travel on the reg’, it’s a good idea to be covered while you’re travelling, especially if you’re overseas. Flight cancellations, lost baggage, accidents and trips to the hospital can happen, and will definitely ruin your holiday vibes if you’re stuck footing the bill.
At the end of the day, insurance gives us one less thing to worry about, and, in today’s schedule-your-freakouts-appropriately world, that’s invaluable.
With insurance, you don’t need to worry about life’s hard knocks. With Spot Money, you don’t need to worry about finding insurance. We’ll provide you with a range of life cover, funeral and car insurance offers, all you need to do is pick the one that you like most.
We do the leg work so you can do life. Everyone wins! Stay tuned for more money hacks and how-to guides we’ll be dropping soon.
The content provided in this article is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. We accept no responsibility from any loss arising as a result of your reliance on information contained in this article, any related communication or on our app.