How to Spend Money Wisely » Insurance

Insurance you CAN NOT do without

A while back Tom did an interesting list of “insurance you can do without” where he pointed out several insurance products you can do without. I thought we should take a look at a few insurances that you CAN’T do without.

Life insurance

Many either ignore life insurance in their financial planning or think it is not important. If you have dependents, life insurance is vital to your family, it is not there to increase your net worth or benefit you directly, and the purpose of life insurance is to protect your family! Not having sufficient life insurance is leaving your family very vulnerable, just imagine you have a mortgage and other loans over $300,000 and something were to happen to you, what will happen to your loved ones? They have to either down seize and fire sell the home or use retirement savings, either your family will not only be in emotional stress but also financial stress.

Protect your family by purchasing enough life insurance to help them through the rough times, not sure how much is enough? See how much life insurance do I need? And also what is term life insurance?

Critical illness insurance

Tom has pointed out that you can do without Cancer insurance, but you can NOT do without critical illness insurance. Unlike life insurance, critical illness insurance is known as a living benefit and is there to protect YOU AND your family. Critical illness insurance gives you a lump sum when you are diagnosed with any of the covered illnesses (heart attack, stroke, cancer …and more). It is tax-free and can be used for anything, most often it is used to seek treatment outside of the country.

Disability insurance

Disability insurance is another insurance you can not do without. Take a minute and think about what is the most important asset you have? It is your ability to generate income, if you are making say $40,000/year and you are 30 years old, you will be making over $1.4 Million over the next 35 years not including any raises. If you owned something that was worth $1.4 Million would you insure it? You can even get disability insurance for the self-employed.

I may sound like an insurance sales agent (which I was a few years ago), but this is to protect yourself. You do not need expensive products, just purchase enough insurance to cover your needs, you can follow these 14 tips when purchasing insurance. Your financial pyramid will be very unstable if you ignore insurance products and only focus on investments. There is some insurance you can do without, but you can NOT do without these three insurance products.


  1. Craig

    Health is the #1 insurance you have to have. At what point does life insurance come into play? I recently got renters insurance thinking for now that’s a must for me. And also have auto, but you have to have that.

  2. Toddriffic

    Nice write-up… Life insurance is especially important if you have a family, but even for those who will take care of your arrangements…it can be a burden.

  3. Rick

    One type of insurance, I know from experience, that cannot be ignored is Mortgage Insurance. My elderly mother was offered this type of insurance but like fools we did not get it because we envisioned my mother being around for years and years with the proper care. Such was not the case and she died shortly after we purchased property we could only afford with her supplemental Social Security checks.

    Now the house is not paid off as it would have been, we’ve paid an additional $25,000 since that time and, even with us doing our best, the loan has been like an enormous weight stopping us from pursuing our own financial goals and making it so difficult we can barely make ends meet.

    • Tom Drake

      Rick, sorry to hear about your situation. And you’re right that insurance to cover your mortgage is a necessity. However, you can get a better deal with term life insurance, making sure the value covers all your debts and any other priorities (children’s education, etc.). Mortgage insurance can be a bad deal since it costs more compared to term life for the same amount of coverage. It’s also a declining coverage, where term life insurance stays at a set amount.

  4. Rick

    Tom, thanks for your advice. It seems like eons ago now that I was forced by economic necessity to cash in all of my own personal life insurance. It’s obvious from your comments that I should have had coverage on my elderly mother. Well, failure is often the best teacher to the slowest to learn and most stubborn humans. I certainly qualify, there. I will not make the same mistake twice. Fortunately, I have a rather large policy on myself so at least those I leave behind will feel a lighter financial load.

  5. Jimmy

    My employer covers disability insurance for me. And most of the jobs I’ve ever had has it as one of our benefits.

    Im worried about in between jobs and switching to one without that benefit. There is no insuranc product for that. The only thing they can do is overlap coverage. I don’t want to pay twice.

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