I Love Insurance: Love Letter #2

I know, it’s a nerdy thing to say and surely, I could think of more interesting loves, but I’m not budging on this one.  I love insurance.

Life is full of risks, they cannot be avoided.  Car wrecks, house fires, and loss of life happen every day.  No matter what innovations, safety features, or federal regulations are created, we cannot fully remove risk from our lives.

What risks really matter?  What do I do about them?  This of course is where insurance enters the picture.  

Before jumping to solutions, I take these steps: 

1. Identify the risk 

2. Quantify the risk 

3. Transfer or Assume the risk

If there is a real, potential risk in front of you that you can put a number to and that you don’t want to bear on your own, transfer the risk to an insurance company.

Personal income is an easy example.  Is there a risk that my family could lose my income?  Yes, whether through death or disability my income could disappear.

Can I quantify that loss?  Yes, I know how much I earn each year and can estimate how long that income would be needed over the remainder of my family’s life.

Do I want to assume that risk? No, unless I have already accumulated that wealth, I would want nor could I assume the risk.  

Do I want to transfer the risk?  Yes, through some form of life and disability insurance coverage, this risk can be transferred to an insurance company for a fraction of the cost.  

Insurance is this beautiful mechanism that allows us to gather up similar risks and protect them all together in a cost-effective way.  In my life, I’ve experienced medical expenses and loss of property that I’d still be paying off today.  While insurance is not perfect nor is the sale of it at all times what it should be, it provides real protection and when used properly insures those things most precious to us. 

I love insurance.

Any opinions are those of Landon Vick and not necessarily those of RJFS or Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete; it is not a statement of all available data necessary for making an investment decision and it does not constitute a recommendation. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional. Be sure to contact a qualified professional regarding your particular situation before making any investment or withdrawal decisions.

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