It
is almost impossible to build Capital if the noise of life and money, is bigger
than your earning capacity. Starting from zero is the hardest part. Pooling big
risks is how we historically managed this. Groups of risk takers joining together
and splitting the costs in “Mutual Societies”. Accepting a smaller loss for
certain instead of a big loss that wipes you out. The biggest component of
wealth creation is time. To have time, you need to be able to withstand the
things you can’t control. My rule of thumb is to self-insure for things that
won’t wipe me out. For the rest, get cover if you can. The three basic “big
waves” are Death, Disability, and Severe-Illness. If you have dependents, then
Life Insurance is necessary to stop your death meaning severe hardship for your
loved ones. This is the history of “Scottish Widows”. Severe Illness insurance
does the same, but you are still alive and may still work again. Disability
cover is for when an accident prevents you from earning. Insurance allows the
fire to start.
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