When Insurance is Prudent

Insurance can be defined as prudent when the financial harm caused by a particular event would be more damaging to you than the regular cost of the premiums. This harm may be to the person considering taking out the insurance policy, or to the ongoing circumstances of their loved ones.

In today’s world, this covers an amazing range of possibilities, from models insuring their faces and track athletes insuring their legs to the basic standards of car, house and life insurance.

Some insurance policies are necessitated by law, although the degree of cover required may vary depending on state or country. In most places in the world, third party insurance is a minimum requirement for all car owners, so that any damage caused to others will be covered, although not your own.

Whether or not a particular type of insurance is logical or prudent for a person depends on their circumstances and social affiliations. But it is certainly prudent to consider not only those circumstances that are current, but also those that are foreseeable or desired in the future.

A young single person with no dependents might consider life insurance to be a waste of money that they could instead be spending on enjoying life now. However, for life insurance, the younger you start the higher the insured amount will be in comparison to the premium you pay; effectively the opposite to car insurance.

Most people eventually wish to partner with someone and start a family, at which time they recognize the need to have sufficient life insurance to support and care for their loved ones if the unfortunate happens. Even for those that decide to stay single, there may be family members or charity organizations they wish to bequeath financial resources to in the event of their death. It is therefore prudent to take out life insurance at your earliest convenience.

Health and dental insurance presents a similar situation; medical expenses for most occur in their later years, by establishing a policy early on you can spread and minimize your costs. Historic family vulnerabilities and lifestyle choices can dramatically affect risk analyzes however, so this is not a certainty for all.

Many employers offer health, dental and even life insurance to their employees as part of their benefits package, which can be very attractive. But nowadays, employment situations are considerably less secure than they have been in the past; having at least some level of independent insurance is well advised. When offered such packages it pays to check to see if they are transferable, especially if you are accepting a lower salary based on the package.

Deciding that an insurance policy for a particular circumstance is advisable is, however, but the first step. Taking out a policy with, and paying premiums to, a fly-by-night insurer will do you no good at all. If the cost of premiums versus the proposed payout sounds too good to be true, then it probably is.

Consultation with friends, family and independent insurance brokers recommended by those you trust, is to be advised before consulting an insurance company. Before signing on the dotted line, you should always read the complete insurance policy, especially the smallest print and the most boring sections.

Unfortunately, many policies are still written in such obtuse legalese jargon as to be incomprehensible to even the greatest intellects that don’t specialize in such matters. Do NOT be pushed into signing before consulting at least one independent lawyer who specializes in such matters. A knowledgeable friend might be best, but be absolutely certain that they really do understand such matters and are not merely attempting to impress you with their savoir-faire.

If the insurance salesman tries to manipulate you into signing without such consultation, they are NOT to be trusted. Discontinue your negotiations immediately. There is no shame in not being able to evaluate such complex documents without help. Consultation is not only sensible but also admirable, showing strength of character, rather than weakness. Begin the process again with worthy insurers instead.