This is one of the statement Suze Orman made that made me really think: Insurance is insurance; investment is investment.
This is the fifth installment about the interview of Suze Orman made by Karen Davila of ANC. If you haven’t read the previous four below are the links so please go check them out.
One of the question raised during the interview is about insurance. According to Suze Orman you need to get insurance if someone depends on you financially. At the same time you need health insurance specially when your employer does not cover you so that you secure yourself from expensive medical needs that may arise.
Suze clarified that insurance is different from investment because insurance agents always approach you saying insurance is a good investment. The point is insurance serves a different purpose as compared to investment thus it is not considered as an investment. Insurance is a safety net for the unexpected which your emergency fund might not be able to cover.
You need to get insurance to support those people who are financially dependent to you to cover their needs when you unfortunately passed away ahead of time. Your kids, or mom, or anyone who are currently dependent to you might be greatly affected upon your demise thus ensuring that their needs are met until they are able or someone will take them.
As a rule get insurance for your car, health, and business. These insurances are necessary in case unexpected things happen. On the other hand only get life insurance when someone is actually dependent to you. Again insurance agents will tell you that it is a good investment but always consider first the type of insurance and the people dependent on you before signing that policy because it might not be cost efficient and you could have earned more if you put such money to your investment.