Let’s talk about risk
February 21, 2019
In simple terms, risk is about the likelihood of something bad happening. Consider the risk on your house.
You might have a fire that causes significant or total loss in the value of your house. That could be very expensive.
If you have a mortgage, one of the conditions is that you are required to have fire insurance. It is not an option to go without. If your house burns there is a financial loss, but that loss is covered by the insurance company.
In reality, houses are very rarely destroyed by fire. But because there is some risk, you have insurance.
What is the risk to you and your family if there is a loss of income as a result of injury or death? Could your family continue to make ends meet?
While mortgage insurance is required for your house, there is no such requirement to insuring your loss of income due to such things as injury or death.
One common argument against loss of income insurance is that if there are two incomes in a household you are likely still going to have one income. However, most households rely on both incomes.
When there is just one income, the stay-at-home spouse provides valuable services to the family. Will certain household duties have to be completed by hiring someone if the stay-at-home spouse is unable to perform those duties? Especially if there are children.
I recommend having a good conversation with your insurance provider. What are your financial risks and how can they be insured?
Understand the risks, the insurance options, and most importantly the cost. All personal expenses, including the cost of insurance, should be considered in whole and reflect your personal priorities.
It is not likely you have the budget to insure against all risks. But it is to your advantage to develop an insurance strategy.
For whatever reason, having the appropriate insurance coverage is often overlooked.
I recommend reviewing your insurance needs carefully.