Essays

Riding the Line of Overcautiousness

Over the last few months, I’ve made the conscious decision to investigate long term disability insurance and long term care insurance for myself to help my family survive if I were to become incapacitated for some reason. I’ve been quietly collecting quotes on these insurance types and reading up on them so that I really understand what I’m buying and what the loopholes are.

I had a conversation with a friend that I trust quite a bit about this process, and he seemed completely shocked that I was doing this. “You’re listening to too many insurance salesmen,” he told me. “Why would you even consider such a thing?”

He went on to talk about the various scenarios that might occur that would require such long term insurance, and for each case he had a reasonable explanation as to how the bills would get paid. He argued that there might possibly be a case for long term care insurance but he believed it was the equivalent for buying house insurance against a volcano eruption while living in Iowa – it could happen, but if it did, there would be bigger fish to fry.

Having known multiple people whose lives were torn apart because of a lack of a method to pay for long term care or to help out with income under a long term disability, I can clearly see the cases for such insurance.

Yet I’m left wondering if I really need it – or if I’ve been convinced that I need it by reading a number of very conservative personal finance writers (and, I suppose, potential insurance salespeople).

In the end, though, my friend was right: personal finance books were the source for my interest in such insurance. But they were also the source of a lot of other great ideas I’ve applied positively in my life: spending less than I earn, managing my money better, cutting my spending, planning for the future effectively, and so on.

How can I know what advice really applies well in my own life? Here are some tactics I’m applying as I dig further into this insurance question.

Always do your own research before making a move. I might read that long term care insurance is a good idea in a book or two, but that shouldn’t be enough to just blindly go ahead and get that insurance. Instead, it’s merely a starting point for further investigation. Dig into the details of any such advice you might follow. In my case, I’ll want to know what that insurance actually covers, when it takes effect, and what sorts of loopholes exist.

Never absolutely trust any single source of information. Just because a personal finance book or two or a columnist or two claims something is a good idea for me doesn’t mean that it is. Again, I need to look at the specific situation of my own life and figure out if I actually need such things – or if my money might not be better spent shoring up our financial situation in other ways.

Know that there are risks and costs associated with anything – nothing is a sure thing – and know your tolerance for risk. There are no guarantees in life, period. The best we can do is consider our situations and make realistic assumptions about what’s likely to happen and what’s not likely to happen and then use that as the basis for future choices. Is there a likely need for long term care for me? No. Is there a possible need for long term care for me? Yes. The question is how much of a risk it is – and what the consequences are on both sides of that bet.

The interesting part about this is that two people in the exact same situation might come to different conclusions here simply because they have different risk tolerances. I know, for example, that my risk tolerance is relatively low, so I might find that such insurance is right for me, while someone else might have a higher risk tolerance and might find it’s not right for them.

Never be afraid to ask for help. By this, I don’t just mean turning to personal finance professionals – although they can be useful. I’m talking about turning to family members and friends for advice. I’m talking about sitting down with your partner and talking through these tough decisions.

We don’t have to go it alone when we’re making choices like these. If you’re unsure after doing your own legwork, don’t be afraid to talk it out.

You might find that, in the end, you’re being too cautious. Or you might find you’re not being cautious enough. Either way, you’ve done the work to find the right answer for you, and that’s a success no matter how it turns out.