Fee-Only Financial Planning / Advising in Kitchener Waterloo Cambridge - WD Development


The Conversation We Often Don’t Start or End Well


Why do we buy insurance? To protect ourselves and our families.

What are we looking for protection from? Here’s where the conversation gets fuzzy- we’re not really sure.  We know that there are risks- of becoming disabled, of dying prematurely, of needing treatment for cancer or a heart attack.

We know there are risks that apply to us, we want protection, we can buy protection, and yet we often don’t, or what we own isn’t adequate.  How does this happen?

Risk can be defined as chance of a loss.  Most forms of personal insurance will protect against loss of income.  Using the examples above- disability, premature death and costs associated with treatment of sudden medical events- all of these can be insured against.

Why does the conversation get uncomfortable, complicated and confusing?  Why do many of us avoid the conversation altogether?  Why do we leave ourselves and our families open to an outcome that we don’t want when there was a solution to avoid it?  Let’s look at a process that can help to clear the conversation and the decision.

Get the right information and Ask the right questions first.

Or “Don’t Tie your Conversation to the Wrong Posts”

The first wrong post- to explain this one, I will use a definition of what risk is not. “A risk is not an uncertainty (where neither the probability nor the mode of occurrence is known), a peril (cause of loss), or a hazard (something that makes the occurrence of a peril more likely or more severe).” 

Disability is not an uncertainty- we can find out our statistical chances of experiencing a disability during our lifetimes.  Cancer isn’t a risk, it’s a peril.  Smoking isn’t a risk, it’s a hazard.

When we get caught up in the wrong explanation of risk, we don’t make rational decisions on how to protect against the risk; we’re tying our decision-making to a wrong post.  I recommend taking a look at what your risks are.

The second wrong post- putting costs or benefits above your personal goals.  Insurance premiums will cost you money.  Life insurance benefit amounts recommended for a parent with young children and a mortgage are large.  If your goal is to fully protect plans and goals that you made as a family, there may be no other way to do that except through insurance.  As your circumstances change, your insurance needs will change.   I recommend having a full conversation about your personal and family goals before reviewing whether you have appropriate insurance coverage.

Once you have the relevant information to approach the decision, there are a few more steps to arrive at the best solution for you.

Compare your Options to your Goals, not to each other

Avoid Common Pitfalls

Like the Binary Trap; Voting Trap and the Intuitive Trap

Last question: “What’s the worst that could happen and if that happens, am I willing to accept the outcome?”

To discuss your risks and how to effectively plan around them, please contact [email protected] to arrange an appointment.

Definition of risk: Read more:

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Sara McCullough
May 17, 2024
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