Who needs Insurance Protection more? The Rich or the Poor?

My belief in Insurance, as it has always been since its creation, is in the pooling & transferring of risk. 

I [quote] from wikipedia on the term "Insurance": [Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment].

We all have possessions in life, and what accompanies with them is the potential of loss. Murphy's Constant also states that "Matter will be damaged in direct proportion to its value". Hence, we protect and manage our beloved/prized possessions for the fear of losing it. We manage our relationship, for the fear of slipping into a separation. We lock our doors to keep the intruders away from unwanted theft. The fear of losing our possessions stems from the sense of ambiguity. We are just not sure if it would happen. But because of fear, we choose to protect it against potential loss. An example widely used in the insurance industry is the "Spare-tyre" theory. Why do we have with us a spare tyre in our car boot when all the four are still in perfect condition. Yes, you just mouthed it…"JUST IN CASE!". The act of carrying a spare tyre is a classic exhibition of an engineered contingency by transferring any possible risk of a damaged tyre to the spare one!

Regardless of wealth, we all have possessions, tangible and intangible. The need for an equitable transfer of risk of a tangible loss is arguably declining when plotted against a person's accumulation of wealth. A Wealthy car-owner will find it financially manageable to repair/replace his damaged/stolen vehicle. But then again, why has he taken up motor insurance? Does he really find no value in implementing it other than for reason of legislation?

Now, let us study a scenario in an average breadwinner, John, whose wife does not work and stays home to take care of their school-going kid. John strives hard at work to bring food to the table, and expenses on any other items could possibly be deemed as luxury. One day, John is diagnosed with kidney failure and requires periodical admission to the hospital and routine renal dialysis. Do you think medical insurance is a luxury or a necessity for him and his family? On hindsight, with the above scenario painted out in the first place, I would imagine that anyone who is of a sane mind would have advised John to pay for a medical insurance, no matter how meagre his discretionary income is. Now, put yourself through those unwanted scenarios. Have you implemented the applicable insurance coverage that you would have advised John to do?

In my view, a person's insurance need has minimal, if any, correlation to his wealth. No amount of wealth can buy you a crystal ball that tells you what is going to happen next. When one cannot and/or chooses not to live with some forms of uncertainty, they have an option to transfer the risk of a tangible loss via Insurance. And when such an act is duplicated by a large number, it transforms into a phenomenon known as "pooling of risk". Though the risk has been pooled, it is not going to be offered to you for free. It comes at a cost or what we called premium. Then it is down to any willing individual to work out and allocate a budget for this purpose.

This writing here is by no means an attempt to debate on the subject. Rather, we like to urge you to review the priorities in your Insurance Protection needs. That is, which type of Insurance do you need more. If you are unsure, do not hesitate to review this with your trusted adviser!