Now more than ever, people feel more inclined to live frugally as the battle against the certified COVID-19 pandemic rages on. According to McKinsey,
“globally, the insurance industry experienced strong premium growth in 2015, at 5.6 percent, whereas growth in 2016 is expected to be noticeably slower, at 4.4 percent. Total premiums are expected to reach €4.6 trillion, up from €4.4 trillion in 2015. The mere conversation of investments and/or insurance and the importance of it will be met with an almost certain and unruly rebuttal presently, as priorities and efforts are gravitating towards saving than investing in long term ventures or insuring something which by every indication aren’t an immediate and pressing need. Well, needs may have changed but attitudes have also altered and rather positively towards the possibilities of having an insurance. It may seem a shortsighted gesture from some experts but individuals who ply with such train of thoughts harbor certain misconceptions about insurance coverage just not being for them. The technicalities within the subject is enough to eject any interest the guy-next-door may be harboring.
These myths according to Investopedia includes: “I'm Single and Don't Have Dependents, so I Don't Need Coverage”, “My Life Insurance Coverage Only Needs to Be Twice My Annual Salary”, “The Cost of My Premiums Will Be Deductible”, “Only Breadwinners Need Life Insurance Coverage”, “I'm Better Off Investing My Money Than Buying Life Insurance of Any Kind”, among others. Aside these misconceptions, insurers may also be doing a bad job and likely prospects actually have morbid thoughts on having an insurance cover due to the message delivery.
Candidly, thinking about your death is hardly the most enjoyable way to spend your life, but that’s not the only reason people avoid shopping for life insurance.
According to NextBillion’s article on insurance, it said that insurance plays a critical role in ensuring that people and households have the ability to mitigate unexpected financial shocks, preserve their assets and take productive risks. But if that is our only focus, we miss an important part of the impact we can have. As development practitioners, we need to recognize the broader role insurance can play in generating economic opportunities.
When insurers build the resilience and productivity of businesses, other sectors in the economy can grow. And when insurers use premiums that they have pooled together to invest capital over longer-term horizons in productive opportunities such as infrastructure development; they create jobs, fuel growth and encourage innovation.
The COVID-19 pandemic has enlarged the importance of the insurance sectors’ role in development, and in the economic resilience of businesses and individuals. NextBillion asserts that,
“As of April 9, a third of the global population was in lockdown to slow the spread of the virus. Lockdown measures have forced many businesses not operating in essential services to temporarily close their doors. While this has a huge impact on all businesses, it is likely to hit micro-small-and medium-sized enterprises (MSMEs) the hardest. Without adequate reserves, appropriate insurance solutions or easy access to credit, many MSMEs are forced to lay off workers– or worse, shut their doors permanently. This, in turn, has devastating effects on individuals’ welfare and economies at scale”.
Paradoxically, the increasing hardship on victims of the COVID-19 as well as businesses and economies has further highlighted the relevance of a comprehensive, steady and developed insurance market and the role it plays. The major selling point for most insurers is the factual belief that the only permanence in life is change, and with the unpredictable nature of life, insurers are at the vanguard of bridging the uncertainty divide with their insurance packages. Investopedia puts it rather explicitly by saying,
“We usually can't prevent the unexpected from happening, sometimes we can get some protection. Insurance is meant to safeguard us, at least financially, should certain things happen”.
There are numerous insurance options and many financial experts will say you need to have them all. It can be difficult to determine what insurance you really need. Purchasing the right type and amount of insurance is always determined by your specific situation. Factors such as children, age, lifestyle, and employment benefits play a role when you're building your insurance portfolio, and according to Investopedia, there are four types of insurance everybody needs.
Life insurance is one of the most touted packages on the insurance list and industry experts suggest a life insurance policy that covers 10 times your yearly income, but that's a number not everyone can afford. Investopedia insists that the
“greatest benefits of life insurance include the ability to cover your funeral expenses and provide for those you leave behind. This is especially important if you have a family that is dependent on your salary to pay the bills”.
According to a 2018 study by LIMRA, formerly known as the Life Insurance and Market Research Associations, one in three families might not be able to meet their day-to-day expenses within a month of the primary breadwinner's death.
“When estimating the amount of life insurance coverage you need, remember to factor in not only funeral expenses, but also daily living expenses. These may include mortgage payments, outstanding loans, credit card debt, taxes, child care, and future college costs”.
They explain that the two basic types of life insurance are traditional whole life and term life.
“Whole life can be used as an income tool as well as an insurance instrument. As long as you continue to pay the monthly premiums, whole life covers you until you die. Term life, on the other hand, is a policy that covers you for a set amount of time”.
Conversations on health insurance has gained an all-high traction even more so now due to the current global pandemic where comprehensive health is the focus. In view of that, Moneycontrol an India online business news website posits that there is an increase in the number of inquiries on whether existing health insurance policy covers hospitalization expenses related to COVID-19, and many people are also approaching insurers to buy a policy for themselves and their family members.
“It is not uncommon in India, that you see people struggling to pay for their hospitalization expenses. At the billing counter of the hospital, there is always someone who has either exhausted savings or sold their valuable assets to pay for the hospitalization expenses. Healthcare treatment costs are growing exponentially by at least 15 percent year on year. In fact, the COVID-19 expenses can go upwards of Rs 5 lakh”.
Statistically, you and your family are just one serious illness away from bankruptcy, according to a study published by the American Journal of Public Health in 2019. In the Journal's survey of more than 900 Americans who filed for personal bankruptcy between 2013 and 2016, more than two in three bankruptcies were caused by medical problems—from bills, income loss due to illness or both.
“Those numbers alone should incentivize you to obtain health insurance or review and possibly increase your current coverage. But with rising co-payments, increased deductibles, and dropped coverage, health insurance has become a luxury fewer and fewer people can afford. When you consider that the national average cost for one day in the hospital was $2,517 in 2018, even a minimal policy is better than none,”
Investopedia said. They suggested that,
“If you don't have health insurance through an employer, check with trade organizations or associations about possible group health coverage. If that's not an option, you'll need to buy private health insurance.
Long-Term Disability Coverage
Just like most insurance covers, long-term disability coverage is one type of insurance most people think they have no need for. According to the 2014 Council for Disability Awareness, there are more employers offering long-term disability insurance benefits plans. Of the companies that participated in the annual CDA member Long Term Disability Claims Survey in 2013, just over 214,000 employers made long-term disability plans available to their employers. In the words of Investopedia,
“long-term disability insurance is the one type of insurance most of us think we will never need. Yet, according to statistics from the Social Security Administration, three in 10 workers entering the workforce will become disabled and will be unable to work before they reach the age of retirement”.
Lorne Marr, an independent insurance broker and founder of LSM Insurance Services when interviewed on MoneySense said,
“If you have coverage, ask them to walk you through your group benefits. If you find that your company plan covers at least 60% of your pay in the event of an accident or illness that prevents you from working, you likely have enough coverage. If you don’t have kids and your mortgage is paid off, you likely could get by on a policy that pays 40% to 50% or your salary. Basically, you want enough coverage to meet your living expenses—meaning mortgage payments, taxes, and hydro, food and transportation costs”.
Interestingly, Investopedia identified that, workers who have great health insurance, and a good life insurance policy don't prepare for the day when they might not be able to work for weeks, months or ever again. While health insurance pays for hospitalization and medical bills, you're still left with those daily expenses that your paycheck generally covers.
You may not be able to singlehandedly fight the COVID-19 pandemic, but certainly, the three booted insurance policies can tread on pandemic trespassing on its territory. According to the Organization for Economic Co-operation and Development (OECD), the insurance industry is a key component of the economy by virtue of the amount of premiums it collects, the scale of its investment and, more fundamentally, the essential social and economic role it plays by covering personal and business risks.