No one likes to think about it, but insurance should be a priority. It’s not just about protecting your house, car, or livelihood. Life happens, and any big financial setback can get you off track in building wealth.
Protecting yourself from potentially crippling debt should be part of your financial planning. Fortunately, many types of insurance cover everything—from auto accidents to medical expenses without putting too much strain on their wallets.
Here are the top eight reasons why insurance is important today (and why you should get one).
- Gives you peace of mind
- Protects your assets
- Keeps business moving
- Covers medical and health needs
- Offers rewards and discounts
- May be required by law and lenders
- Creates a legacy
- Provides security in retirement
1. Gives you peace of mind
Insurance gives you a priceless gift — peace of mind. Having one allows you to plan and prepare for potential risks in life. You can customize the coverage based on your current needs and budget. Most policies cover common risks such as accidents and illness, while others offer more specialized protection like disability or long-term care coverage.
If something unexpected happens, you won’t have to scramble financially to figure out how to pay for it. Knowing that you have a financial safety net gives you peace of mind. Other losses that you can apply for insurance are properties like houses and cars in case of fire, accidents, or catastrophic events.
2. Protects your assets
Insurance is a powerful financial tool to protect your assets. It can cover the costs associated with repairing or replacing valuable items like a home or car or compensate you for lost income due to a disability or job loss. In effect, insurance is a form of risk management against potential losses.
Say you have a home, and you applied for property insurance. It will cover the cost of repairs (or replacement) if the house sustains damage from a fire, storm, or burglary. The same goes for auto insurance—if your car is damaged in an accident or stolen, your policy can provide reimbursement for necessary repairs or total replacement costs.
3. Keeps business moving
Businesses can protect assets from potential losses due to natural disasters, accidents, theft, or other unforeseen circumstances. They can keep running smoothly and recover quickly after any issues.
Consider a small business that had an unexpected power outage caused by a severe storm. Without insurance coverage for business interruption losses, the company would be unable to recoup its income. With insurance coverage, it can receive compensation for its lost profits while it focuses on getting back up on the market.
4. Covers medical or health needs
Medical and health insurance plans can cover various expenses, such as hospitalization, doctor visits, prescription drugs, and rehabilitation services. They can also cover preventive care such as annual check-ups, vaccinations, and even vision or dental care.
Without insurance coverage, individuals may delay or forego the care they need due to a lack of funds or resources, and it could lead to more severe illnesses in the long run. Health insurance plans often include additional benefits like free preventative care services or discounts at pharmacies, adding more value for those who purchase them.
5. Offers rewards and discounts
Insurance companies offer discounts and rewards to incentivize their customers to remain loyal and informed about their policies. One example is the AIA Vitality program by BPI, which gives customers rewards like discounts on gym access or flights for participating in workout challenges and health assessments.
This reward program helps insurance companies engage their customers and provides added value to policyholders. Some insurance companies also offer discounts when a customer changes certain behaviors, such as maintaining the same coverage for more than one year or enrolling in an autopay program.
6. May be required by law or lenders
Lenders often require insurance when you take out home mortgages and auto loans. This requirement ensures they will receive their money back should something happen to the borrower, like death or disability. It assures lenders they won’t suffer a substantial financial loss should something occur to the borrower.
Travel insurance is also highly recommended when traveling abroad as it ensures that any misfortunes are covered financially while away from home. It usually covers medical expenses related to illnesses and accidents abroad, lost luggage and property damage/theft, travel delays, or cancellations.
7. Creates a legacy
Insurance is one of the most critical components of financial planning today, as it can help you create a legacy for generations to come. A comprehensive policy allows you to take advantage of opportunities that may arise in the future, such as investing in real estate or starting a business.
With proper coverage, these investments will be safeguarded and managed appropriately as part of your long-term legacy plan. Many insurance policies pay out cash benefits upon the passing away of the insured person or the expiry of their policy. Heirs or beneficiaries can use the funds to pursue higher education, start a business, purchase a home, or open an investment account.
8. Provides security in retirement
Insurance is essential to retirement planning, providing a layer of security in later life. Insurance can help protect retirees from the financial risks of old age, such as long-term care and healthcare costs. It can also provide a financial safety net if everyday expenses become too much to handle.
A Filipino retiree may purchase an annuity product or life insurance plan to protect their income during retirement. Annuities provide a steady income over time, while life insurance plans can provide a lump sum payment on death that can be used to leave behind a legacy for loved ones or pay off outstanding debts.
This type of protection enables families affected by tragedy to continue with daily living expenses while they adjust emotionally and financially after losing an important family member.
Final thoughts
As you can see, personal finance is something that everyone should be taken seriously. Making the right decisions now will give you peace of mind and financial security and create a better future for yourself and whatever you leave behind as a legacy.
You don’t have to worry about customizing these decisions or feeling overwhelmed by information. There are many resources available that can help guide you toward making the right choice that suits your individual needs.