Many young people learn the important financial lessons of life much too slowly. They start out with a relaxed attitude to debt and run up massive credit card bills. After struggling for most of their twenties with repayments they finally learn that saving is the key to a better financial future. Instead of paying double for everything by borrowing and paying extortionate interest they effectively pay less by having the money available in cash which can even sometimes lead to discounts – how many times have you been offered a ‘cash price’ and wished you could accept but have only your credit card to offer?
Saving a Penny to Lose it All
Unfortunately that lesson to save can lead to many young people shunning additional expenses such as insurance. They get their first mortgage and are told by the adviser that it is important that they protect themselves against death or serious illness with a policy. They are young, of course, and can’t see death or illness in their future and decline. After all it was all that extra spending on things they didn’t really need just yet that got them into debt all those years ago.
Sadly the opposite is true. Failing to protect yourself when you’re young can lead to a situation where you are not afraid of death but being afraid of surviving. Imagine going through years of rigorous cancer treatment only to ‘recover’ in a state where you will never be able to work again; yet you are only 25. You have maybe fifty years ahead of you of destitution and dependency on the state. A relatively cheap insurance policy could have protected you and allowed a life of comfort.
Insuring Your Phone… But Not Your Family?
Shockingly many people take out insurance policies on their phones that would pay for tens of thousands in life cover should the worst happen to them. Imagine how easily most families could replace a new iPhone. Probably a month or two of saving at most. Then think about how difficult it would be for a family that had lost the main breadwinner to survive and how much easier tens of thousands of extra money would make their lives and adjusting to their loss.
Protecting Your Assets
Many in the middle classes acquire additional wealth and look to invest in further properties. Again seeking to maximise profits and minimise expenses few landlords take life insurance or landlord insurance to protect themselves in the event that tenants default. A snowball effect devastated many of these investors during the recent falls in worldwide property prices. At the same time as a few tenants were failing to pay property prices were also falling which prevented landlords from selling their properties at a price sufficient to repay their debts. This crunch left many who had previously been ‘paper’ millionaires from equity broke and looking for an exit strategy.
You Need it but Hope to Never Use It
In most countries car insurance is a legal requirement and 99% or more of the population in those nations would take it out in accordance with the law. Almost everyone who has it would hope to not use it. Life insurance is very much the same. Naturally you hope not to die but if you have a family to protect and children who would have depended on your income for many, many years to come then it is an absolutely essential policy for you to have in place.
Author:Beth Holden is a freelance finance writer and landlord insurance expert who writes on behalf of one of the biggest professional investor and landlord advice sites in the UK.
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