Don't think of insurance as an expense

Let me explain this statement.

To me, paying an insurance premium is like putting money into a “protection account”. An account that you may not be able to see, but it is there for you when you need it the most.

Example 1:
Mr X pay $2,000 insurance premium a year.
In Mr X “protection account”, he would have:
-$2,000,000 life coverage.
-$2,000,000 disability coverage.
-$500,000 yearly medical coverage.
Over 20 years, he would have paid $40,000 in premium but he have millions of dollar in his “protection account” that he can access in times of need.

Example 2:
Mr Y set aside $2,000 a year into an emergency account in the bank.
So if something happened, Mr Y can take money from this account to pay let say medical bill.
Imagine for the next 20 years nothing happened, he would have accumulated $40,000 + small interest from the bank. So maybe this money look big to you, maybe not. But no matter what, he can't use the money. Because it's in the emergency account, he can't spend it for leisure. If he use it, then he won't have money in times of need.

Now think really hard, which person is in a better financial position as a whole? Mr X or Mr Y?

If something unfortunate happened in the 20th year, Mr X has millions of dollar that he can access while Mr Y only can have his $40,000.

What if something happens in the 2nd year? Mr X has millions of dollar that he can access while Mr Y only have $2,000.

To me, Mr Y did not do a good planning with his money. He did not use his money to the fullest. He did not leverage it. Even though he has that cash in the emergency account, he is in a worse position financially than Mr X.

So who do you want to follow? Mr X or Mr Y. You choose.

Cheers! Have a great day.