The Real Cost Of Being Uninsured
Life insurance, disability
insurance, long-term care insurance—if you are like most people, when your
insurance agent starts talking about coverage you ought to consider, all you
can think about is what it’s going to cost you.
And even though it may seem like the economy is getting better, many people are
still struggling with the impact the recession has had on their budget and what
expenses they can put off until tomorrow.
According to the 2013 Insurance Barometer Study, conducted by LIFE and LIMRA, the majority of consumers are concerned about having enough money for a
comfortable retirement, with paying for long-term care and medical expenses
next in line in terms of worries—all legitimate issues.
At the same time, it can be
challenging to find the money to insure against a possible future event such as
a major illness
or debilitating accident when you’re facing real expenses or dealing with an
insufficient income right now. In situations like that, it can be tempting to
metaphorically cross your fingers and hope for the best, putting insurance on
the “deal with it later” list. But before you choose that option, you need to
know the real cost of being uninsured.
Life Insurance
Imagine that you were to die today. Would your family be able to pay your final
expenses and continue to meet ongoing living expenses without your income? Or,
if you are a stay-at-home parent, would your partner be able to afford to pay
someone to perform all the duties and responsibilities you handled? What about
long-term plans—will your children be able to attend college or your spouse
retire as planned? With adequate Life Insurance, your family
will be provided for when you are no longer there.
And, depending on the type of policy
you choose and the option added to the plan, your insurance can be increasing
in value or even, in the case of a terminal illness, provide funds to pay bills
even before you die, relieving you and your family of at least one major worry.
Worried about the cost of insurance?
While the vast majority of underinsured middle-income consumers include cost as
one of the reasons for not purchasing life insurance, even when they believe
they need it, the reality is that most people grossly overestimate how much a
policy premium would be. For example, a 20-year, $250,000 level-term life
policy for a healthy 30-year-old has an actual yearly premium cost of $150.
Those surveyed estimated the same coverage at $350 to $500.
Disability Insurance
You don’t need disability insurance, you think. After all, isn’t that what
Worker’s Compensation is for? Yes — and no. If the injury occurs on the job,
then Worker’s Comp does come into play. However, only 5% of disability claims
are work-related—and, according to the Council for Disability Awareness,
approximately 90% of disabilities are caused by illnesses rather than
accidents.
For example, if you are diagnosed
with cancer or sustain major injuries in an auto accident and are unable to
work, what will be the source of your income? How will you cover your living
expenses and the additional cost of medical care? In this scenario, half of
working Americans couldn’t make it one month before experiencing financial
difficulties and nearly one fourth wouldn’t make it a week, according to a LIFE
study. With disability insurance, however,
you would have a source of replacement income to cover costs until you’re able
to return to work. Fortunately, there are several options for
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Long-Term Care Insurance
We’d like to think that we will be able to live life on our own terms until
it’s time to go, but the reality is that two-thirds of people will actually
need some type of long-term care, either in their homes or at a facility. Where
will the money come from if you fall into that majority? From Medicare or your
existing health insurance? Not likely, since health insurance only pays for
doctor and hospital bills, Medicare covers only short-term skilled nursing home
care, and Medicaid only comes into play if your assets are very limited.
Will your savings be able to cover the expense? A home health aide three days a
week will cost more than $20,000 a year and full-time nursing home care can be
over $78,000 annually.
Maybe you think long-term care is
something only the elderly have to worry about. But anyone at any age can
suffer from an accident or debilitating injury that requires long-term care. As
a matter of fact, 40 percent of patients receiving long-term care are under age
65.
The Bottom Line
There are a lot of factors to weigh when purchasing insurance, but be certain
to have all the facts before making a decision. As you can see, both buying
insurance and not buying insurance comes at a price. Be sure you know what the
cost is—short-term and long-term.
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