Many would say insurance is important. How many of us have purchases insurance? Anyone able to survive perfectly without insurance?

Insurance is a form of risk management used to hedge against an uncertain loss.

Let's use a car accident as an example, let's say I got into a car accident on my way to work.

There are three possible consequences to this:

1. Hospitalisation - who is going to pay for the medical bills?

2. Death - what happens to my family if death occurs?

3. Disability - I will most probably lose my job, who is going to look after me for the rest of my life? I will most probably become a liability to my family.

So you can see that, these are what we called "Bad Risks", risks that when it happens, it's going to ruin your life. There are no rewards behind these risks that you are taking unlike your investment portfolio. So when you buy insurance, you are basically transferring all these bad risks to the insurance company to handle it for you. If something bad will to happen, the insurance company will compensate you for the losses.

Life is unpredictable, we all know we are going to die one day, but we do not know when or how we are going to die. No one knows what is going to happen to us 10, 20 or 30 years down the road. And that is why insurance exists. When the unfortunate suddenly strikes, your investment portfolio might not even be enough to cover for your losses yet. You should get an insurance and leave your investment portfolio for your other needs and wants.

Insurance is the cheapest when you are young and healthy, get it while you can before it is too late.

Feel free to contact me (email at bio) if you are interested to find out more.

Cheers.

I like to describe insurance as a tool to provide financial leverage for the money that you need but do not have. Generally, an insurance policy is used to cover one of the following three events:

1. Dying too early;

2. Inability to work till retirement;

3. Exhausting hard-earned savings too early.

If none of the abovementioned risks matter to you, e.g. you will stay healthy and have sufficient cash forever, then you do not need insurance. This is because there is little risks of you running out of money that you may need.

And yes, if you can grow your money faster than a covered event occurs, then you do not need insurance coverage as well. But the question is, can you be sure that this will happen 100% of the time?

Altogether, I agree with you on achieving a well-balanced portfolio. In detail, this will be your overall financial portfolio, rather than just your investment portfolio alone. In other words, use insurance as a tool to mitigate the risk that you are unwilling and unable to undertake while you grow your wealth till the point when you grow out of dependency for your insurance policy. Thereafter, you can contain the risk on your own and risk is probably no longer a concern.

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