WYTI Links: 11.09.07 -- High School Playoffs Tonight!

My Alma Mater--Walker High School in Jasper, Alabama--hosts a state playoff game tonight for the first time since I was a Senior (2001). One of our fine young men at Midway is a starter on defense. It'll be chilly out at the stadium, but it should be a fun night of football. Hope your area's teams do well also!

Friday links:

• Behold the Miracle of Compound Interest (via Erin Burt, Kiplinger.com) Start young...start now...
  

• Trimming the Fat: Forty Ways to Reduce Your Monthly Required Spending (via The Simple Dollar) From back in June...some helpful suggestions here...

• 1 Year Ago Today -- 10 Things We've Done to Regain Financial Control (via Gather Little by Little)

• Lessons from the California Wildfires (via Kimberly Lankford, Kiplinger.com)

Cell Phone Insurance: Is It REALLY Worth It?

Some companies estimate that 1 in 4 cell phones will be lost, stolen, or broken within the year. Due to the fear of loosing a $300-500 phone, many people choose to purchase cell phone insurance through their wireless provider or the company they purchase the phone through. The question: Is it REALLY worth it? Consider some of the facts below, crunch the numbers, and you will see that no, it generally is not.

Cost of Premiums - The premiums differ between providers. Insurance through AT&T Wireless, Verizon Wireless, and Alltel is provided by the third-party company Asurion, and costs $4.99 per month. Sprint/Nextel also uses Asurion, but charges $4 per month. NCOA coverage (which is what Wirefly.com sells) costs $50 for 12 months ($4.17/mo).

Cost of Premiums + the Deductible in case of Use - If the phone is lost/damaged/stolen, the deductible for any plan based on Asurion is $50. NCOA does not charge a deductible. If you have insurance through AT&T and lose the phone one time in a two year period, you will pay $169.76 for the insurance plan which replaced your phone ($4.99 x 24 + $50).

Cost of Replacing Your Phone Without Insurance - This is hard to nail down, as the price of phones is constantly changing, and every model has a different price. Keep in mind, however, that the insurance company has the choice to "repair or replace" your phone. Also, if they replace your phone, they can replace it with a REFURBISHED (used) model instead of a new one. AND if they don't have your specific model in stock, they can just give you a 'similar' model, which may not have all of the features of the phone you purchased. However, consider the cost of purchasing a new phone through such sites as Cellularblowout.com. The Motorola L6 is $105; Motorola Razr $125; LG Chocolate is $170; if you just need a phone, the Motorola v180 is $65. This ought to show how foolish cell phone insurance can be. Even through Wirefly, you would pay $100 over two years, and have very little protection for your investment! Remember, the prices above are for NEW phones, you will be given a REFURBISHED phone. Compare it this way. A new Samsung Blackjack costs $330, but REFURBISHED on eBay, the phone goes for around $200.

Generally, cell phone insurance just does not make sense. As an MSNBC article points out, "insurance might make sense for some people — those who are prone to drop their phone, get it wet or somehow disable it. “It might be useful if you happen to work on building skyscrapers and you tend to drop your phone 30 or 40 stories,” . . . . It could also come in handy if you’re buying a high-end PDA phone that would cost you $500 or $600 to replace.” However, remember that the service is not available for some phones, and is more expensive on high end phones for which coverage is available.

Cell Phone Insurance: Is It REALLY Worth It? Generally, NO
-------------------------------------------------------------
Note: If you have had cell phone insurance through Asurion (sold by Cingular/AT&T, Sprint/Nextel, Verizon, and Alltel among others), and had to file a claim with them due to a lost/stolen/broken phone, and received a refurbished phone, you may be eligible to receive some compensation as part of a class action lawsuit settlement. Check here for more information.
--------------------------------------------------
All Cell Phone Frugality Posts in this Series: Cell Phone Insurance: Is It REALLY Worth It?; Cutting Your Cell Phone Bill #1: Multiple Lines; Cutting Your Cell Phone Bill #2: Cutting the Minutes; Cutting Your Cell Phone Bill #3: Cut the Frills; Cutting Your Cell Phone Bill #4: TMTM - Too Many Text Messages; More Cell Phone Frugality
--------------------------------------------------

Car Insurance: Is it REALLY Worth It?

Here's another type of insurance to consider and determine its real value.

In almost every state liability car insurance is mandatory. See here for minimum requirements of each state. When it is the law, there is no question that it is worth it - both financially, legally, and most of all morally/spiritually worth having. If you live in one of the few states where liability insurance is not mandatory, unless you have enough savings to pay out hundreds of thousands of dollars in the event of a wreck without missing it, it would be foolish to avoid liability car insurance. For older drivers, the policy is not cost prohibitive. For young drivers (especially below 21), the costs are high, but so are the risks of a wreck with inexperienced drivers. The bottom line, you can look into any factors you want, liability car insurance is worth it.

What about full coverage car insurance, though? To determine if this type of insurance is worth it, you’ll have to do some figuring on your own.

First, compare the cost of premiums between liability only and full coverage insurance. Consider how much the difference is, and remember that the main reason to pay for the extra coverage is to replace your vehicle in the event of a wreck that is your own fault.

Second, consider how much this will cost if you pay for the premiums for an extended period of time, have a total wreck, and have to pay the deductible. Compute this for a year and then for two years of paying the premiums.

Third, consider how much it would cost to replace your car if you do not have full coverage insurance.

Fourth, consider your ability to pay for that need without insurance based on your savings.

Fifth, consider your ability to self-insure. If you take the difference in premiums, and invest it at 5% (online banking) for the year or two that you figured before, how much would you have in the account? Is it enough to cover what would actually be paid by the insurance company (after your deductible)?

To compute the value of your used car, check the NADA price guide here and Kelly Blue Book personal value here and realize your insurance company will go with the lower of the two values!

If you are driving a newer vehicle, you may decide that the value of the insurance is worth it due to the high loss that could be sustained in the event of a wreck. As your car ages, however, you continue to pay high premiums, though the coverage constantly declines. When a person is paying full coverage for a 10 year old high-mileage car, they are making an unwise financial decision! The amount you would receive in the event of a total loss is less than the amount of premiums payed in over a year or two, and definitely less if the individual self-insures! $100 per month for two years invested at 5% will build to just over $2,500. On the other hand, if you are an individual who has a lot of wrecks, the need for full coverage may be greater, but then, so will the costs!

Think it through though, and re-evaluate your decision to keep full-coverage car insurance on a yearly basis. As that car ages, it is less and less sensible to keep the full-coverage car insurance!

The Total Money Makeover (Chapter 4)

Continuing the "myth versus truth" theme from chapter 3, Dave Ramsey spends more time in this chapter dealing with ideas people have about riches, retirement and bankruptcy, among other things. This chapter is called Money Myths: The (Non)Secrets of the Rich. Ramsey uses the phrase "(non)secrets" because, if you really stop and think about some of the "myths" in this chapter, they simply don't add up to real wealth.

Here are the myths, and truths, in chapter 4:

1. Myth: "Everything will be fine with I retire. I know I'm not saving yet, but it will be okay." Truth: "Ed McMahon isn't coming." (Love it!!)


2. Myth: "Gold is a good investment and will cover me if the economy collapses." Truth: "Gold has a poor track record and isn't used when an economy collapses." In fact, gold is one of the last things "used." In a true collapse, services and bartering become the norm.


3. Myth: "I can get rich quickly and easily if I join these groups, buy this tape set, and work three hours a week." Truth: "No one develops and makes a six-figure income on three hours a week." Sadly, I fallen for this one before. Not again! Oh, yeah, and this section also briefly describes the "real estate at no money down" commercials.


4. Myth: "Cash value life insurance, like Whole Life, will help me retire wealthy." Truth: "Cash Value life insurance is one of the worst financial products available." If you listen to Dave's radio show, he talks about this nearly every day. He is so right about this, too.


5. Myth: "Playing the Lotto and other forms of gambling will make you rich." Truth: "Lotto and Power Ball are a tax on the poor and people who can't do math." Not to mention, they are immoral!!!


6. Myth: "Mobile homes, or trailers, will allow me to own something instead of renting, and that will help me become wealthy." Truth: "Trailers go down in value rapidly, making your chances for wealth building less than if you had rented." This short section (just three paragraphs) is worth the price of the book if this thought has ever crossed your mind.


7. Myth: "Prepaying my funeral or my kids' college expenses is a good way to invest and protect myself against inflation." Truth: "Plans for prepaid funerals and college expenses give low rates of return and put money in the other guy's pocket." To be honest, this is one area where I disagree with Ramsey. I know the math, but there is also something to be said for peace of mind.


8. One of my favorites in the entire book--Myth: "I don't have time to work on a budget, retirement plan, or estate plan." Truth: "You don't have time not to." Well said!


9. Myth: "The debt-management companies on TV, like AmeriDebt, will save me." Truth: "You may get out of debt, but only with your credit trashed." If you are deeply in debt and have ever considered using one of these companies, buy this book and read (and re-read) this section.


10. I'm skipping a few myths in this chapter, and will only mention a couple more. Myth: "I'll just file bankruptcy and start over; it seems so easy." Truth: "Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage."


11. Myth: "I can't afford insurance." Truth: "Some insurance you can't afford to be without." Shameless plug for other articles on this blog: make sure you scroll through the archives and read James's articles on insurance. They are well-done and thorough in looking at different types of insurance.


12. Finally, myth: "If I do a will, I might die." Okay, men, how many of us have thought that? (My hand is in the air.) Here's the truth: "You are going to die--so do it with a will."

This chapter may be the most practical in the "attitudes" section of the book, and it is worth reading several times. Again, in this first section, Ramsey is trying to get you to see money in a different way. If you've ever thought any of these myths, you need to read Ramsey's ideas.

Dental Insurance: Is It REALLY Worth It?

Since I haven't been to the dentist in about 2 and a 1/2 years, and Stacey hasn't been in 5 or 6 years, we're starting to plan to go to the dentist. Since we don't have dental insurance, this post is personally one that I have been examining with great interest.

Cost of Premiums: Two alternatives will be examined.
1. BCBS Dental Insurance - True dental insurance for an individual and spouse through Arkansas Blue Cross/Blue Shield is $55.20 per month, or $662.40 per year.
2. Dental discount groups - These discount groups are not true insurance, but can be purchased for pretty cheap and give considerable savings at some dentists. One example is Dentemax Discount Dental Plan available through dentalplans.com. The cost of this plan is $150 per year (and that includes any dependent children).

Expenses in Need Without Insurance: I called the dentist office I plan to go to for the first time here soon for prices. $130 for a new patient exam and x-rays, $50 for the cleaning. Assuming both Stacey and I do an initial visit, plus an extra visit each (say $80 for that visit, cleaning and exam), and that we have one filling (at $100...estimated based on this dentist's prices compared with those here) the price for all of this without any discounts or insurance would be: $620. However, I don't think the extra visits or a filling would really be that much from this dentist.

Cost of Premiums + Deductible in Use
1. BCBS Insurance - There is a $50 deductible for fillings and other covered restorative services. Coverage is 80% for preventative and minor restorative services. Thus for the visits listed above with this insurance: $114 'co-insurance' + $50 deductible + $662.40 = $826.40.
2. Discount Plan - In depth checkup twice at $33 each; 6 month checkup twice at $22 each; Adult Teeth Cleaning 4 times at $43 each; One filling at $65. Total cost: $347 at the visits + $150 for the plan = $497.

Conclusion: Dental Insurance really doesn't make sense, unless you are going to be needing major restorative service (in which case the BCBS plan above only pays 50%, and pays out a maximum of $1,000 per member per year . . . so it still might not be worth it). A dental discount plan may be very beneficial, depending upon where you live. I would have to drive at least an hour to find a dentist which accepts the discount plans described, so it's not worth it to us. Since I've only had one filling ever in my life, I don't expect to need any for a lot longer. So dental insurance and discount plans aren't for me. Instead, we'll try to deposit a little extra each month into savings, and spread it out over time in that way, “self-insuring.”

NOTE: Over the following weeks I will return to this series (Insurance: Is It REALLY Worth It?). I believe it will be beneficial to examine car insurance, cell phone insurance, and extended warranties or service protection plans, although perhaps not in as great of detail. If you have other types of insurance you would like me to examine, post a comment, and I'll consider doing so. This is the last post concerning insurances relating to health, though.

Maternity Insurance: Is It REALLY Worth It?

Having a child can be quite expensive. The average cost of a birth is $8,000-$10,000 nationwide. Is it really worth it to purchase maternity insurance? Consider the factors.

Cost of Premiums - Our Maternity Rider costs $230.02 per month, or $2,760.24 per year ($27,602.40 over 10 years).

Cost of Premiums + Deductible in Use - Assuming that the maternity rider is kept in place for 10 years, and used for two births, the deductible and coinsurance each time would be $2,750 for our insurance plan. Total cost over ten years - $33,102.40.

Expenses in Need Without Maternity Rider - The average birth costs $8,000 to $10,000. Our standard health insurance covers complications of pregnancy, so the maternity rider isn't needed for C-sections, etc.

Ability to Pay Without Insurance - Without insurance, we would have to pay the bill over time, as would most people, though my understanding of medical bills is that no interest can be charged as long as you are making efforts to make timely payments.

Ability to Self-Insure - If you know how many children you plan to have and when, self-insuring may be possible. The factors below assume a monthly deposit or payment of $275.85 ($33,102.40/10/12) for ten years and assume a birth cost of $10,000.

• Example 1: Births at the end of years 5, 8, and 10. You could pay for all three births in cash. At the end of year 10, after paying for the final birth, you would be left with $8,951.62 in the account.
  
• Example 2: Births at the end of years 1, 3, and 8. You would not have enough in the account to pay for any of the births outright. At the end of year 10 you would be left with $3,600.57 in the account.
• Example 3: Things don't always go according to plan. Births at the end of years 1, 3, 7, and an unexpected birth at the end of year 10. At the end of the 10 years you would be left with a bill for $6,640. With insurance, you would have paid $38,602.40 over that 10 years, instead you will be paying $40,000.
• Example 4: Two planned births. Births at the end of year 4 and 7. You could pay for both births in cash, and be left with $17,729.72 in your account at the end of year ten, paying $20,000 instead of $33,102.40 and getting interest for the difference!
  
• You'll have to do the calculations yourself based upon the cost of your maternity rider and when you plan to have children. But don't forget - things don't always go nearly according to plan. The ability to self-insure is there if you have time to build an account up before it is needed.
  

Return in Payment vs. Premiums Paid In - Based on the information above, most people who keep this type of maternity coverage will pay in more than they receive in return, and quite a bit more.

Other Considerations - Nearly a million full-term newborn babies are placed in a nursery or observation for an average of 3 days, at $2,000 per day ($6,000 extra). You should check your insurance policy, but a maternity rider may be required to ensure that newborns are added to the policy from birth. With some plans a newborn will be considered for coverage only after reviews from their two-month check-up. This factor could quite easily change the value of the maternity rider if it is required to make the nursery care above, any illness and immunizations of newborns, and doctors visits for newborns all covered from their day of birth.

Conclusion - Maternity insurance is a toss-up. If your newborn will be covered from birth without it, you are going to have to pay high premiums for the rider out of your own pocket, and you don't plan to have several children in a short period of time, it could quite easily be more costly than it is worth. If the lack of maternity insurance will cause the pregnancy to be a stressful time for you, or you believe you can carry it for a short period of time, and if it is provided by your work or at a discounted price, it could quite easily be worth what it costs. You'll have to weigh the issues individually to consider if maternity insurance is REALLY worth it.

Health Insurance: Is It REALLY Worth It?

Let's consider health insurance based upon the earlier suggested considerations. Sorry this one's so long! I've been working on it for a couple of weeks now, and now it's difficult to edit it down much more.

Cost of Premiums
The cost of health insurance premiums constantly rise due to inflation and individually as we age. Through the health insurance provider I currently use, an extremely healthy single male will pay $76,935.60 in premiums from age 20-64 for health insurance with a $750 deductible. For a couple who has children at home from ages 25-49, and continues with health insurance coverage until age 64, they will pay $192,020.40 in premiums for the family throughout those years.

Cost of Insurance & Deductible in case of Use
How much will it cost to be hospitalized, with or without insurance (based upon nationwide average costs)?

• Hospitalized for acute bronchitis - average charge: $9,888, but with my health insurance I would stand to pay $750 + 20% (up to $2,000), or $2,577.60, saving $7,310.40.
• Hospitalized for pneumonia - average charge: $21,388. With my insurance I would pay $2,750, saving $18,638.
• Hospitalized for a crushing/internal injury - average charge: $42,514. With my insurance, I would pay $2,750, saving $39,764.
• Now for a real example. I have a relative who recently was in a car wreck at 70 mph. He was life-flighted to a hospital, but luckily his injuries were limited to a broken femur and a cut artery on his head. They placed a titanium rod in his leg, stitched up the artery, placed him in the trauma center overnight. The next day he was in a regular room, and the fourth day after the wreck he went home (short stay!). Two weeks later he was back to work. Luckily, my relative had insurance. The average cost of a life-flight is around $10,000. The insurance company would only cover $2,000. The bills for the rest of the hospital stay were over $56,000. With his high-deductible insurance, having to pay the bulk of the life-flight, and with co-insurance he will probably have to pay around $12,000. That's much less than the over $66,000 he would have been facing otherwise! That difference will pay for many years of health insurance!
  

What about doctor's visits? Consider three of our doctor's visits from this past year.

• The first doctor's visit plus the blood and other tests were billed at $355. The insurance company allowed $163.66 of this, of which my part was $56.36.
• The second doctor's visit was billed at $177. Our co-pay, $30.
• The third doctor's visit with blood work was billed at $128, of which the insurance company allowed $83.32, of which we paid $50.77.
• With insurance we paid $137.13 for the three visits, instead of $660, saving $522.87.
  

What about prescriptions?

• With one monthly prescription at $50/month, with insurance we pay the first $250 of prescriptions and then 50%. With insurance we would pay $425 per year on this prescription instead of $600, a savings of $175. This doesn't take into consideration the amount saved on the prescriptions which went along with the doctors' visits.

This past year, we spent $562.13 above the cost of insurance (a total of $2,013.17 for health care). Without insurance, these same things would cost us $1,260. The cost of the insurance above the benefits it provided for this past year was actually $753.17.

Expenses in Need Without Insurance
This of course varies with what need or claim is being made. Our past year's health bill without insurance would have been $1,260. That's the health bill with just one prescription, three doctor's visits, and nothing nearly serious. That also doesn't include any physicals. Insurance would cover a physical up to $500 (for each of us) without any copay. Paying for our health needs without insurance is expensive.

Ability to Pay Without Insurance
Most people, including us, would be unable to easily pay for the cost of health care without insurance and without saving extra money just for that purpose. Especially if we were hospitalized or became seriously ill like my relative.

Ability to Self Insure
If we invested the amount we would otherwise spend on insurance (this year, $2,013.17), and paid out of the account for the cost of health care, this past year we would have invested a net of $753.17. Over 10 years, that amount invested at 5% would yield $116,953.95, which would cover the average cost of any of the top 259 causes of hospitalization. However, this type of investment would require us staying in extremely good health for several years to build such a fund. Self-insuring is mathematically possible, if we stay as healthy as the normal person and don't have any major health concerns in the next 10 years. However, I don't recommend self insuring because there is no guarantee that you will not have a major health concern for several years to build a fund. My relative in the car wreck was just 20. If he had begun building a self-insure fund two years ago, it would have been much too small to pay the bills. Additionally, if you become sick with an illness (such as a heart attack), not only will your self-insure fund be able to pay for the costs, but your illness would then be excluded from insurance coverage for several years or the rest of your life once you did get insurance! That's a dangerous risk.

Return of Payments vs. Premiums Paid In
It is very possible, feasible, and likely that we will pay in much more in premiums than we ever receive in return of payments. If one becomes seriously ill, this balance could easily shift in the other direction. Our health insurance has a lifetime payout maximum of $2 million - much more than we will pay in premiums.

Other Considerations
1 in 8 women is diagnosed with breast cancer at some time in their life and 1 in 6 men with prostate cancer. 1 in 3 adults get the flu every year, which would of course cause the health bills that year to be more with extra doctor's visits. Each year 114,000 Americans get sick enough from the flu to be hospitalized for it. With the possibility of major health problems, the unlikelihood of self-insuring, and the extra stress, insurance looks pretty good.
Additionally, many jobs provide health insurance, and pay very little more if insurance coverage is declined. In those cases, considering all of these factors, it would be foolish to decline health coverage.

Conclusion
Based upon these considerations, I believe health insurance is really worth it. It provides protection to possibly cover extremely expensive health care. Health care is one type of insurance I deem worthwhile, especially if your workplace provides health care, or provides it at a discounted rate.

Note: costs of health care gained through this site.

LIFE Insurance: Is It Really Worth It?

Life insurance rates are based upon considering the statistical probability of a particular type of person dying. This is calculated based upon mortality tables, the individual's basic health information, size, age, place of residence, etc. I personally purchased $300,000 of term life insurance on a 30 year term. The cost for my policy is less than $30 per month. By the end of the 30 years, I will have paid in just over $10,000.

Let's put my life insurance policy to the scales, and consider it based upon the factors (see earlier post "Insurance: Is it REALLY Worth It? - Factors to Weigh" for a description of each of these seven factors).

• Cost of Premiums: About $10,000 for our 30 year term $300,000 policy on my life. However, the policy we purchased is a Return of Premium policy. This type of life insurance returns 100% of the premiums paid in, if those premiums are paid in for the entire length of the term (in our case, 30 years). With my return of premium plan, I am really paying much less than it seems. The cost to me is REALLY the interest I could be gaining on the premiums if they were invested, and inflation.
  
• Cost of Premiums + Deductible in Use: There is no deductible. The payout would be $300,000, regardless of how many premiums I have paid in. This means that if the policy paid out in the final month, the true return would be about $290,000 ($300,000 less the premiums paid in.
  
• Expenses If the Need Arises Without Insurance: With funerals averaging over $10,000, that would be the first expense. However, the life insurance policy is purchased to cover funeral expenses, and additionally allow my wife a grieving period before having to go to work, provide for our children's care and education, etc.
  
• Ability to Pay Without Insurance: At this point in life, there is no way I can provide the protection which life insurance would provide for my spouse. In the future, any protection my savings will provide can be supplemented through the protection of life insurance. A 30 year term purchased at this point and paid throughout that term provides protection for my wife and future children until after those children have reached adulthood and left home.
• Ability to Self Insure: If the premiums are invested at 10%, the $30 a month would build to $67,814.64 over the course of the 30 years. However, it would be within the 14th year before the self-insured account would reach $10,000. This means that the ability to self-insure is really non-existent.
  
• Return in Payment vs. Premiums Paid In: Unlike some types of insurance, life insurance always provides more protection then it costs.
• Other Considerations: The peace of knowing that if I die at any time over the next 30 years my wife and children will be provided for financially is worth a lot more than the interest and inflation. This type of insurance will remove unnecessary stress if I become ill or injured.
  

All in all, I believe life insurance is a good purchase for us...but you have to consider the factors for your own situation. The Simple Dollar has an article that might be interesting to those considering life insurance.

Insurance: Is it REALLY Worth It? - Factors to Weigh

In examining several types of insurance, I have come up with seven basic factors to consider in determining if a particular type of insurance is REALLY worth it. This list could probably be lengthened, but these are the factors which will be considered in my posts about whether a particular kind of insurance is REALLY worth it.

#1 - Cost of Premiums
First, the cost of the premiums should be added up over a period of time. Looking at the monthly premium isn't a very good way of considering the cost of insurance. Add these premiums up over at least a year, or if possible, over the lifespan of the insurance policy.

#2 - Cost of Premiums + Deductible In a Claim
In considering the cost of insurance, one also has to consider how much they will have to pay in the deductible if they have to use the insurance. This is especially important in making a comparison to self-insurance or expenses without insurance.

#3 - Expenses in a Claim Without Insurance
In the event that you have to make a claim, how much would this claim cost if you didn't have insurance? Without considering this cost, you really can't consider if insurance is worth it. In some types of insurance several different types of claims will have to be considered.

#4 - Ability to Pay Without Insurance
If you don't have insurance, based upon your level of income and savings, would you be able to pay for the claim without insurance?

#5 - Ability to Self-Insure
Based upon the costs above, if the money is invested at a moderate rate with high liquidity (5% for my examples), would you be able to provide this insurance for yourself? That is, can you invest the premiums instead of paying them, and then pay out of the account in the event of a claim? How much less protection does this provide?

#6 - Return in Payment vs. Premiums Paid In
In the event of a claim, how much will you receive in returns from the insurance company in comparison to the premiums you have paid in. Is this difference really worth the risk that you will never make a claim?

#7 - Other Considerations
Other considerations may include the stress with or without insurance, your past history or family's history in this area, and many other factors unique to the type of insurance.

These factors will be considered now in several different types of insurance.

Insurance: Is it REALLY Worth It?

Insurance can become extremely expensive. Health insurance ranges from under $100 for an extremely healthy young person, to thousands of dollars per month for individuals with serious illnesses. Car insurance also has a wide range and even for a driver with a good driving record can cost several hundred dollars for full coverage insurance. Even lower levels of insurances that seem to be cheap can be quite costly when several factors are considered. With insurance currently costing so much, and with the rates of insurance only going higher and higher, a question that comes up is, “Is it worth it?” Off and on over coming posts, I'm going to be examining the question of the ‘worth’ of several different types of insurance.

Before examining specific types of insurance, I think it’s beneficial to consider how insurance works, that is to look at insurance from a purely statistical perspective. When an insurance company pays out to a client, they often loose money on that client. How do insurance companies not go broke? It's pretty simple really. They collect funds from a large group of people, invest those funds, and pay out to the few who qualify for distributions. Insurance is beneficial to many individuals because it provides them with protection they can not provide for themselves. It is profitable for the company because the average person will pay more in premiums (and the interest on those invested premiums) then they receive in payments. Therefore, mathematically and statistically, each of us would be better off without any insurance whatsoever. HOWEVER, IT IS BY NO MEANS MY SUGGESTION NOR MY LIFESTYLE TO LIVE WITHOUT ANY INSURANCE.

Those who purchase insurance do not purchase insurance because they plan to be the average person who pays in more than they receive in benefits. Nor do they plan to have a car accident or disease so they can get their money’s worth from the insurance company. They recognize that they may be the one who isn’t average - they may face a situation which they cannot provide for, and so insurance provides protection in case that happens.

The question, “Insurance: Is it really worth it?” is therefore not entirely simple, nor is the answer the same for every individual. This is a question that must be asked and answered in each category by each individual. Over the next few posts, we’ll simply be examining some things to help answer this question in these areas.