Purchasing insurance coverage is essentially important, but there are multiple outcomes we can get. Insurance isn’t the same with gambling. With the former, even if we “win”, we win by having a car accident, getting an illness, becoming disabled or even, dying prematurely. If we “lose”, nothing bad actually happens to us, but we lose the money that we have paid to the insurance provider. Based on statistics, for healthy people under 65 years old, they have 1 percent chance of becoming disabled in any given year, 0.5 percent of having critical illness in any given year and 0.15 percent chance of dying in any given year. However, these risks increase cumulatively and when we are 65 years old, we have 50 percent chance of becoming disabled, 33 percent chance of getting critical illness and 10 percent chance of dying in any given year.

Here are four possible outcomes when we buy an insurance protection:

1. We have insurance and something happens: Events like becoming disabled, getting an illness and dying could actually happen to us. For this reason, we should be properly protected. With relative small amount of premium, it is possible we get significant cash, tax-free. This will help us to sustain our lifestyle, pay mortgage and other debts and replace lost income until we get new jobs. In general, the insurance costs should be about 2 percent of our income.
2. We have insurance and nothing happens: We should consider ourselves lucky if nothing ever happened to us before age 65. As an example, we could spend $1,000 each year for 40 years on health and life insurance. It means that $35,000 of premium is used to provide protection that we may or may not need. For many people, this is equal to one year of income. However, many financial advisors would say that it is an acceptable expense.
3. We don’t have insurance and nothing happens: Again we are lucky if nothing happens through the age 65 and we don’t have any kind of health and life insurance. However, we truly win if the money we save is used for useful investment options. It may not be a big win if we use the money for consumer products that we don’t need:
4. We don’t have insurance and something happens: These people are the biggest losers. Something bad happens with their health and they need to spend much money. In many cases, our family is left without enough financial protection. If this happens, our savings could be depleted in just a few months. We may no longer be able to pay for mortgage and we could be evicted. We lose everything!

It should be noted that risks to our health and lives are very real and nobody is immune. Only a few lucky individuals don’t need to be admitted to the hospital before 65 years old. We don’t know what the future may hold and it is important to have enough insurance coverage when we are still healthy.