plonkee money an english-er's thoughts on personal finance

August 23, 2007

yet another post about insurance

Filed under: insurance — plonkee @ 12:00 pm

So I was talking to my fellow m-network members about insurance and I explained my foolproof method for determining whether you need a certain type of insurance. The key thing is not just how likely the bad thing is to happen, but the impact that it will have.

Its not the risk of dying that’s the variable as to whether you should have life insurance, its the risk x outcome that you need to consider.

e.g. the risk of me dying is negligible, the (financial) effects of me dying are negligible
negligible x negligible = low so don’t bother with life insurance plonkee


the risk of me become disabled is low, the (financial) effects of me becoming disables are catastrophic
low x catastrophic = high so get disability insurance plonkee

So there you have it. The perfect way to decide whether you need insurance.

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