Insurance is often times prudent because it is a hedge against misfortune. Anyone who does not like risk may be inclined to want lots of insurance because it can really help a lot should an unfortunate circumstance arrive. What’s more, many people experience some kind of adversity or another in their life and in many cases insurance can help with that. There are many reasons why insurance is prudent, a few of which are outlined below:
*Peace of Mind: It is nice to know if something bad happens, one’s family will be taken care of, or the related bills will be paid, or the car will be fixed etc.
*Socially Responsible: Owning insurance is also socially responsible in some cases because sometimes life is about responsibility and taking care of dependents or those affected by others mistakes or unfortunate circumstances.
*Self Respecting: Owning insurance is a sign of self respect because it means one values their life and isn’t just willing to put it on the line in the name of low probability of something bad happening.
*Risk Management: Insurance of any kind lowers risk in life. The more insurance one has the more assistance insurance companies can provide if necessary.
*Legally required: Often automobile and mortgage insurance can be a requirement rather than a choice. In these cases one simply has no choice but to be insured or face potential penalty.
*Future Insurance Protected: If one is insured, that insurance can generally not be taken away should one’s circumstances change. However, if one doesn’t have insurance and one experiences a need for insurance, an insurance provider may deny an application for insurance.
The Prudence of Knowing which Insurance is Right:
In addition to understanding why insurance is prudent, it is also helpful to know which type of insurance is prudent. The reason for this is because not everyone needs to be insured by every type of insurance product and not everyone can afford every type of insurance that is available because there are so many. In other words, it is also prudent to be able to distinguish between probable risk, and low risk. To illustrate, the list below demonstrates just how many types of insurance can be acquired, and this does no’t include all the types of insurance available.
*Health Insurance *Life Insurance *Auto Insurance *Liability Insurance *Long term care insurance *Hazard Insurance
*Accidental death Insurance *Dental Insurance *Mortgage Insurance *Investment Insurance *Gap Insurance
All these insurances can add up to a tidy sum and if there is never an actual need for the insurance one may regret the decision financially. The inverse is true if one does need the insurance but didn’t have it. For example, if one is a medical doctor and frequently performs operations, liability insurance can be a very good idea to protect against lawsuits. However, if one is in a profession that can not be so easily sued, the need for liability insurance declines.
Insurance is thus prudent, but it is not always prudent to have every kind of insurance. What’s more, there are many types of sub-categories of insurance that may suite one’s needs better than other policies. For example, if one doesn’t have a family, a highly leveraged life insurance policy might not be as necessary as a more simple type of policy such as term life. Also, some insurance policies, such as employer health savings accounts may be tax deductible and thus financially prudent.
Insurance is prudent for several reasons such as legal requirements, an insurance to be insured in the future, potentially better sleep, and social responsibility to family members and/or loved ones. Knowing this, it is also prudent to assess which type of insurance is wise and which types can be put on hold or avoided through savings or another financial instrument. There are many types of insurance to choose from, and thinking about one’s own life and needs can assist in determining the wisest of policies to purchase.