Various forms of insurance are often big pieces of my clients’ budget. The irony is that they often have life insurance and car insurance, but no health insurance. Yet the consequences of illness would be far more devastating than the risks my clients were protecting against. Gene Melchionne’s piece at Consumer Ledger starts a good conversation about the purpose and need for insurance.
In the past two months I’ve looked at several budgets that contained disproportionately large insurance expenses: once for car insurance for a single woman with two old, paid for cars, and the other, life insurance for a single person of retirement age.
If the purpose of insurance is to pay a necessary expense should the named catastrophe occur, then in my view, the cost of the protection for each of these clients was disproportionate to the risk. I sent the clients out to reconsider the need for insurance of that magnitude.
It seems that budgets sometimes get on autopilot and no one has considered the necessity of the expense, or its relationship to other budget items. When there isn’t enough money to go around, all items should be on the table.