Often people will say “I haven’t seen any return on my investment” (when referring to personal insurances e.g. life, trauma, income, medical cover). As in, they haven’t made enough claims in their opinion to justify paying the insurance premiums over the years.
Insuring ourselves can get super expensive, particularly as we get older. This is because the risk of health events happening becomes more likely as we age.
What people forget when it comes to insurance, is if you haven’t had to make a claim, you are lucky. For those who have made claims, it’s because they have passed away, been diagnosed with a serious illness such as cancer, can’t work due to an illness or injury, or have needed a surgery or treatment. It’s not exactly something to get excited about!
Insurance is there to protect against the risks we can’t afford to cover ourselves. If we could afford to cover it, we wouldn’t need insurance. No one can predict what will happen in the future, so having the peace of mind that you and your family will be ok if something happens is worth it for a lot of people.
Insurance absolutely must be suitable for your unique needs, life stage and budget. You should only be paying for insurance you can afford to have. It is a luxury to protect against all of life’s risks, so we must choose the most important things to us to cover, with what we can afford.
Here’s a hypothetical to consider – Take a 35 year old who’s had medical insurance for 10 years. They would have paid approx. $14,500 in premiums over the past 10 years.
At 35, they are diagnosed with breast cancer and need surgery, chemo, radiation and non funded medication – The cost of the surgery is $30,000, chemo $40,000, radiation $8,000, and the non-funded medication, $175,000 per year.
Premiums paid = $14,500
Claims made = $253,000
Here’s a hypothetical to consider – Take a 50 year old who’s had $500,000 of Life insurance for 10 years. They would have paid approx. $6,000 in premiums over the past 10 years.
At 50, they have a heart attack and pass away.
Premiums paid = $6,000
Claim made = $500,000
The question you need to ask yourself is, what would happen if I didn’t have insurance to cover these events?
You can decide for yourself what risks to cover, and what risks to take.
If you have the money to not need insurance, that’s amazing. The problem most of us face is we don’t have the amount of cash needed to fund these types of scenarios. In most cases, it makes more financial sense to insure against these risks.
*Please note this information is general in nature and you should seek personalised advice to suit your unique circumstances.