02 Mar Protect Your Phone? or Protect Your Income?
Find Your PDQ*
*Personal Disability Quotient
Two years ago I was shopping for a new mobile phone. I love technology and gadgets. I went to my local Verizon store and picked out the latest and greatest from Samsung. The price tag was $795.
The sales clerk knew his stuff and was also a good salesperson. I am sure he was incented to build the sale and offer accessories and an insurance plan. However, I think he truly believed it was in my best interest to buy a service plan to protect my investment of $795. After all, how could I turn down such a deal? Only $5/month for 24 months.
I explained to him that over 2 years the service plan added $120 or 15% to the cost of the phone. The phone came with a one year warranty and the incidence of failure was quite low. If I had to replace the phone, I wouldn’t be happy but I could afford to replace it.
I then asked him what would happen if he had a motorcycle accident and couldn’t work for 6 months. (I knew he had a Yamaha WR 250R). Of course, like most people especially young folks, he couldn’t imagine having an accident or getting sick…..things like that only happen to the other guy. However, he humored me and played along.
“Well,” he said, “I don’t have a lot of money saved up. I might not be able to pay my rent and would have to move back with my parents.”
“How would that work for you?”, I asked.
He became thoughtful and frowned. Losing his apartment and independence would be devastating.
After a moment or two, I said, “You are asking me to pay an additional 15% to protect a phone that I could afford to replace if necessary. What percentage of your income would you be willing to pay to protect your lifestyle?
Most Americans are greatly underinsured against the possibility of income loss due to illness or accident, even among those whose employers offer disability income insurance. The insurance industry has responded by scaring people half to death. Ron Lieber spoke to this in a New York Times article entitled: The Odds of a Disability are Themselves Odd. http://nyti.ms/2nvJjzV
Why do people fail to insure their most valuable asset? DENIAL
Somewhere between no coverage and the insurance industry’s gloomy forecast, there is a sensible nexus where risk and premium intersect. For a personal assessment of your current coverage, contact me for a complimentary review.
Deciding what to insure.
Create a table with the following headings: Name of Asset, Replacement Cost, Chances of Loss, Cost of Annual Cost of Protection (insurance if any)
List all your assets, i.e. home, car, major appliances, in the first column and complete the table going across. (see the fig 1 for the odds). Include as an asset “Future Value of Your Income”.
Find Your PDQ (personal disability quotient) – Personal Disability Quotient Use the results to help complete the table.