Monday, September 24, 2018

Seemingly Rich, Probably Poor!

According to a recent report from the Department of Housing and Urban Development (HUD), a family living in the Bay Area with an annual income of $117,400 can be considered to be in the ’low income’ category. Those with an income of $73,300 are in the ‘very low income’ bracket. A study by the Brookings Institution says that those earning six figure salaries can be considered to be ’poor’. This is not surprising, given the wide variation in earning levels across the U.S.


A lot to feel blessed

Across the U.S., the median household income is $91,000 for a family of four. It is estimated that more than 40 million people in the country live on less than $25,100 a year, which places them below the poverty line. Between 2008 and 2016, salaries for full-time workers in metropolitan San Francisco rose by 26%, faster than any other part of the country. Dallas is in the second place with an increase of 14.4%. Those living in the Bay Area, therefore, have a lot to feel blessed.

 A lot to protect

The people of the Bay Area in general, and San Franciscans in particular, have deservedly earned their high incomes. The area is a hub of high-tech industry, which has triggered the economic boom. What many of those people do not realize, however, is that the other side of ‘increased prosperity’ may be the probability of ‘increased losses’. This situation issues from the failure to act when you have a lot to protect. A million dollar home is nice to live in; but rebuilding in case of its unexpected destruction will cost a lot more than a million.

The same holds true of expensive cars and similar possessions. In the event of the death of an earning member of the family, the effect of the loss of income is correspondingly huge. It was on that income that the future of the family depended entirely, and to shatter those hopes is to rob the family of its future.

Insurance: the best protection

Insurance is the best way to protect a family from loss, no doubt. However, it must be of the right type and for the right amount. According to recent research, about 60% of homes in America are underinsured, approximately by 20%. In other words, if a home worth $500,000 is destroyed, the family will have to raise $100,000 on their own to cover the rebuilding cost.

The three main reasons for this debacle are: (1) people have not recalculated the value of their homes over the years; (2) they have not updated their policies after making improvements or additions to their homes; (3) they have fallen victim to the ‘it-happens-to-the-other-guy-not-me’ syndrome. The same problem afflicts life insurance: higher costs associated with rising standards of living are overlooked, and policies not updated. Health insurance is yet another similar problem area.

Importance of professional guidance

Most people know what they need to insure but not how much to cover. Finding the right balance between the cost of the policy and adequate coverage is never easy. That’s where the insurance professional plays a critical role. They have the expertise and experience to assess your insurance needs, and to customize the right policies for you and your family and ensure the kind of security you want.

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