What is the quickest way for you to financially lose it all? Spend more than you make and go into credit card debt? Buy too much house, too much car, and then lose your job? Get divorced?
No, the fastest way to go broke is to suffer an accident and go to the hospital.
I realized this recently after my Dad suffered a terrible accident. He was cutting down a tree at my sister’s house and climbed up to trim some branches, in order to help guide the fall when he finally cut through the trunk. Things were going smoothly and he was in zone…until he slipped and fell 20 feet to the ground.
By a miracle he survived, but suffered a fractured vertebrae and several broken ribs that required two surgeries to heal and a month long stay in the hospital. Physical and occupational therapy to regain his ability to move and function independently will take another month yet.
Besides the physical pain of this ordeal, the financial cost is huge. The surgery and hospital stay alone like runs into the $250,000 – $300,000 range. Only two years into retirement, this bill would have devastated my father and nearly everyone else in America…if it weren’t for insurance.
In that aspect we lucked out in a few ways. My Dad had great insurance being a former union member – we had no trouble hitting the yearly deductible! My sister’s home insurance also had fairly high liability coverage. Together they will likely cover 95%+ of the bill and spare my parents from having to sell the house, go back to work, or do other things to make the money back.
I’ve known other people who were no so lucky. People who got into a car accident requiring major surgery, which forced them to sell their house and file for bankruptcy. People who suffered from long-term illnesses that required close monitoring by nurses, slowly draining their savings away like a vampire. And those are just the stories people felt comfortable enough to share with me.
If it wasn’t obvious before, it should be clear now: insurance is a key part of your safety net. Health insurance, car insurance, home insurance, liability insurance, catastrophic insurance – all of these help you manage the worst that life can throw at you. As you master the ability to budget and save more than you spend, buying enough insurance is essential to your long-term security.