Thursday, March 19, 2009

Insurance, Good or Bad ?

The most confusing financial vehicle in this blog is probably the Insurane element.

Sometimes insurance was cursed here, sometimes this blog says you must have it ... Sometimes I say Don't Buy IT !   Then follow by Yea, You Should Sell Insurance ...  "what in the world is your REAL standpoint on insurace !?"

First of all, "Insurance" doesn't even make it to my wealth pyramid.

but then later I explain Insurance plays a 'supporting' role in protecting the goals you want to achieve or already achieved in life.  ( read here )

I also touch on the "return" of insurance by Comparison among Insurance, Fix Deposit and Mutual Fund.  Since my proposed solution in Personal Finance is to have your very own portfolio, on the insurance part, I propose Buy Term Invest The Rest. to get the best out of all from above comparison.  ( but not suitable for everybody )

I also highligh some of the pit-falls in today's insurance industry

1. Higher than FD insurance is A FAKE marketing talk ! ( case 1, case 2 )
2. But then sometimes it is possible ( case 3 ) with a twist in it
and the solution is to invest monthly instead of yearly 
(but not for traditional insurance)

Then confusion starts when I put up quite a funny article basically saying, "Want to settle your bad debt ? Sell Insurance !".  When someone are in doubt, I even re-assure them with small talk.

So to sum all above up and hopefully can clearify somethings ...

Buy Insurance for Protection - Good !
Buy Insurance for Return - Bad !

Sell Insurance to earn Income - Good !

Don't forget I mentioned before Income is NOT a part of Personal Finance Plan.  So if you have faith in that, you wouldn't have this kind of confusion.  Buying insurance is a part of your finance plan, Selling it, is NOT !  It doesn't matter what the source of your income is, your life plan stay the same.

So recommending you to sell insurance has nothing to do with recommendation to buy.  Different rules apply in Income topics.  You need to be smart and hard working in generating income.  In personal finance, its ok to be dump and lazy when its done the right way - the simple way too.

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ChampDog said...

I like your last statement. In pf, it is okay to be dumb and lazy as long as we do it right. :)

Insurance package btw has become too complex until people has already confused with the original purpose.

Selling insurance is the good source of income too and sustaining it is challenging...

Mt. said...

indeed, thats what FP education is all about, it can be quite simple at times ...

there is one key reason why insurance is seem complicated today, I think that post will be released soon :)