Everyday Cheapskate: The Most Overlooked Type of Insurance
Insurance is a funny thing. You learn all you can, shop diligently, scrape together the money to pay for it and then hope you'll never have to use it.
In addition to health and automobile coverage, most people insure their lives so that in the event of their death, those who depend on their income will not be left high and dry.
Term life insurance, the insurance of choice for all us cheapskates, is relatively cheap because so many people pay for it who never use it. The insurance companies invest all of those premiums, make an obscene fortune doing so and end up paying out far less than they take in.
Face it, folks: These days, with medical technology what it is, the odds increase every day that a disease or accident that would have killed you a decade ago will now leave you disabled -- alive but unable to work.
Unfortunately, many of us will need disability income protection sometime before we die. One out of every 4 of today's 20-year-olds will be incapacitated for at least a year before they reach age 65. Without insurance, a disability could spell financial disaster.
A recent study reported in the American Journal of Public Health found that 66.5% of all bankruptcies in the U.S. (approximately 530,000 households per year) were due to medical issues -- either because of high costs of medical care, time out of work or both.
WHY IT'S SO EXPENSIVE
Disability insurance is far more expensive than term life insurance. In fact, it rivals the more-expensive whole life insurance but does not offer the dubious advantage of cash values. No wonder so many people overlook this most important of all insurances.
Disability insurance is relatively expensive because there's a much higher probability you will use it. With life insurance, most people underestimate their life span, so they end up buying insurance they will never use. Or they buy ridiculously expensive insurance. such as whole life or universal life, and then drop it the minute they go through a financial downturn.
But when it comes to disabilities, people of all ages have equal risks, which means it is more likely you will need it at some time. If you are in a two-breadwinner household, it is likely you need disability insurance more than life insurance, given how expensive it can be to care for a disabled person.