Warning: this article might bum you out a bit, but give it a chance! You see, when you first start making a financial plan, things can be pretty great. You get to daydream about your future. You set up investment accounts that are going to grow to be extremely valuable as the years go by. And you usually have a game plan to slash your borrowing costs and become debt-free. Everything is positive and happy and fun until… it’s time to talk about insurance. This is a conversation you can’t avoid because of one simple fact. There’s about an 80% chance that all of your efforts to invest regularly and pay down your debts will work out exactly as planned. You’ll reach retirement with plenty of money to enjoy the life you imagined. However, for some people, there’s also about a 20% chance that something will go wrong. Someone will pass away unexpectedly, be diagnosed with a serious illness, or become disabled, even if only temporarily. If any of these things happen, your household income will probably take a hit. And if that happens, there’s a good chance you won’t be able to maintain your financial plan. In the worst case, you may even start doing the reverse of your financial plan—taking money out of your savings and racking up new debts. That’s why you need to make insurance part of your financial plan. In fact, don’t even think of making a financial plan without insurance. Here are three quick stories to help explain:
Term life insurance saved the Chan family
chan Henry and Lily Chan built a beautiful family—two sons in high school, a daughter in her first year of university, and a tiny Bichon Frise with a big personality. Then, late one Saturday night, their world changed forever when an accident involving a drunk driver took Henry away without warning. Lily and the kids were devastated. Money was obviously the last thing on their minds at first. But as the shock gradually wore off, reality started to set in. How would they continue living their lives without Henry to be their main provider? The answer was term life insurance. Henry’s policy wasn’t expensive—less than $100 per month—but when it was needed, it paid a $1 million tax-free benefit to Lily. That was enough to pay off their house, support the kids’ schooling and make sure Lily would never have trouble paying the bills.
Critical illness insurance saved Brian’s sanity
brian Brian is a fit, hard-working guy in his mid-40s. You can imagine his shock when the doctor told him he’d need urgent surgery to repair two arteries near his heart. The good news was that Brian was expected to make a full recovery, he just had to ease up on the salty foods he loved so much. The bad news was that he was going to miss several weeks of work without pay. Normally, this would have been a financial disaster. Brian would have had no choice but return to work early, even if he was still feeling unwell. But critical illness insurance provided Brian with a tax-free payment of $100,000. That was more than enough to pay the bills, including new ones for his medication and physical therapy, and to take a proper rest before returning to work.
Disability insurance saved Sharon’s home
sharon Sharon worked in the corporate office of a major department store chain for more than 25 years. So it was a scary moment when she realized her rheumatoid arthritis had gotten bad enough that it was just too painful to continue working. Losing her social connections at work was bad enough. But how was she going to continue covering the costs of her one-bedroom condo, with its small remaining mortgage, plus utilities and maintenance fees? Fortunately, Sharon had disability insurance in place. It provided 70% of her old salary, which was enough to keep her safely in her home. In fact, with reduced commuting costs and other expenses, Sharon was able to maintain the lifestyle she was accustomed to, while using her extra free time to take deep breathing classes that helped her symptoms.
You were warned: it’s never fun to think about something bad happening to you or someone you love. But when you realize how common these things are – an accident, a medical emergency, or a chronic illness – you can see why having the right protection in place is a big part of feeling better about your money. Make insurance protection an integral part of your financial plan, and even if the worst happens, the best may still be yet to come.