Insurance is like that TV show you like, but you don’t like to admit it to yourself and you definitely won’t admit it to anyone you know.
Yes, I’m looking at you former male Sex in the City fan from 2006. You know you told your girlfriend you didn’t want to see the movie, then put up an Oscar winning performance describing how you would “watch it for her”. Meanwhile, you couldn’t wait to see what Carrie and the girls got into in that magical hour and a half.
Just like Sex in the City, you tell your friends you hate your insurance policies, but I know deep down, you secretly like the fact that you own them.
Unfortunately even though you are happy with the fact you own your insurance policies, the odds are you are underinsured in various areas of your finances. Whether it be life insurance, disability insurance, auto insurance, you likely fall into the underinsured category somewhere.
Insurance, whether it be life insurance, health insurance, disability insurance, home owner’s insurance, is designed to simply transfer a risk from you, to somewhere else.
The real reason you should have insurance is not the fender bender or the annual trip to the doctor. People tend not to realize the fact that insurance is for the large risks inherent in life. Insurance is for the unfortunate time it was raining, you couldn’t brake in time, and you had six figures worth of damage you are liable for.
You should care less about running over the curb and doing $1,500 worth of damage to your car. In the grand scheme of things, you should care about the $100,000 fast ball life throws at you, not the $1,500 slider. My grandma throws $1,500 sliders. Nolan Ryan throws $100,000 fast balls (even though he’s my grandma’s age now).
Be happy you own insurance to transfer the risks of life, because insurance didn’t always exist. Back in the day, you accidentally poisoned another man’s horse and can’t afford a new one, get ready to duel.
These days, no dueling needed. Could you imagine getting in a fender bender on Broadway and 1st and having to get your revolver, no thanks.
So you have finally admitted you secretly deep down like the fact you have insurance, just like the fact that you secretly like Sex in the City. Now to the question whether you have the correct amount. Having the wrong amount can still be devastating to a family.
Here are some statistics for life, auto and disability insurance that should make you want to look into your policies:
Are you Underinsured?
Life Insurance
The 2013 LIMRA Life Insurance Barometer Study found that while 85% of individuals agree that life insurance is necessary, yet only 62% of people say they own life insurance.
40 percent of Americans who have life insurance coverage don’t think they have enough.
Source: Genworth LifeJacket Study 2011
Among households with children under 18, 4 in 10 say they would immediate financial trouble if a primary wage earner died today
Overall, 7 in 10 of all households said they would have trouble covering everyday living expenses after several months if the primary wage earner died.
Source: LIMRA Facts About Life 2016
This statistic may be the most troublesome:
Forty-eight percent of households need more life insurance based on LIMRA’s need model. That’s 60.1 million families. The average need is close to $200,000
Source: LIMRA Facts About Life 2016
Over 60 million families need $200,000 more life insurance coverage?! That’s just crazy.
If its a cost problem with insurance, term insurance for someone who is mid-aged and has moderate health isn’t very expensive. So go out and get a quote for the appropriate amount of insurance.
Auto Insurance
The Insurance Information Institute estimates that in 2012, 12.7% of drivers didn’t have any auto insurance whatsoever.
This means if you are in an accident, there is around a 1 in 8 chance you will be involved in an accident with someone who has no auto insurance. When you start looking at this by state, it can get even more loopy.
In Oklahoma, 25.9% of drivers have no auto insurance! Holy shitake money mushrooms! In Florida, 23.8% have no auto insurance. (I’m from Florida, this actually doesn’t surprise me)
I used to delve deep into my client’s finances and would often see a liability limit way under where they needed to be. Each state has a limit of liability insurance needed for auto insurance. If you have only the bare minimum amount of insurance your state requires, its not even close to enough. You should have a minimum of 100 / 300 ($100,000 per person $300,000 per accident).
I remember clients who had $10,000 in liability insurance coverage. That’s crazy. If its a cost thing, increase your deductible simultaneously as you increase your liability limits, it may offset the increase in cost to your liability coverage increase.
Disability Insurance
A separate joint LIMRA and LIFE Foundation study found that only 31 percent of U.S. workers have some disability insurance coverage with half believing they need more disability insurance coverage.
The Social Security Administration estimates that one in four 20 year-olds in the workforce today will suffer a disability before they retire
LIMRAhttp://www.limra.com/uploadedFiles/limra.com/LIMRA_Root/Posts/PR/_Media/PDFs/2015%20DIAM%20FINAL.pdf
There is a 25% chance a 20 year-old in the workforce today will have a disability before they retire and only 26% of workers questioned by the LIMRA study said they own disability insurance. Yet 45% of workers stated they believed they need disability insurance.
Being disabled can be a huge blow to your finances. The ability to go to work and generate income to pay your expense, save for retirement, and continue to keep the promises you’ve made to your family, is detrimental. Without a gigantic amount sitting in a bank account, a disability will negatively affect your ability to reach your financial goals down the road.
The first step is admitting it. I am happy that you have now admitted that deep down you are a Sex in the City fan, and you also like the fact you own insurance. The second step is making sure you don’t accidentally annihilate your finances due to a lack of protection.
So go look into your policies and make sure everything is looking up to par. Carrie, Samantha, Charlotte and Miranda will be soooo happy you did.
Photo credit: Sex and the City by Sheila Thompson / cut from the original / CC BY 2.0
