I bought my first house in the mid-1990s. I made sure to get homeowners insurance, and fortunately, I’ve only had to use it once in the last 25-years for a small claim.
That’s many many thousands of dollars spent on insurance over 25-years, and I’ve collected not even 1/20th of that amount back to me in the form of a claim.
Ironically, homeowners insurance—like life insurance—is one of the few things we buy that we hope to never use.
I spend thousands of dollars every year on insurance: car, travel, business, medical, life and more. And I can count on one hand the number of claims I’ve made in the last 30-years.
Frankly, I hope to keep it that way.
That doesn’t stop me from writing checks for all of the insurance policies I have—knowing, or rather hoping—that I will likely never collect on most of them.
A recent study from 2019 revealed that 69% of Americans had less than $1,000 in savings.
I expect that many of these individuals were on the bottom of the income ladder, and were challenged enough to save for food and housing, let alone retirement or an emergency fund.
But, many of the 69% spent so lavishly on unnecessary items and accumulated excessive amounts of debt that they’ve left themselves with little to spare if an emergency should arise.
Well, that emergency is here.
Many people with high-paying jobs and many small business owners have now found themselves in a panic situation with no cash to buffer them.
I published an article on February 17th, 2020, days before the peak of the stock market, and admonished Ray Dalio for suggesting that “cash is trash.”
Ray Dalio, one of the wealthiest hedge fund managers in the world, actually said these words less than three months ago: “cash is trash.”
Dalio spoke similar words two years ago at Davos when he said that investors would “feel pretty stupid” if they hoarded cash while stocks soared.
I wonder … do the investors who are sitting on cash now feel stupid?
Do those homeowners with insurance who have seen their homes catch fire feel stupid because they bought insurance?
Of course not. But then again, hindsight is always 20-20.
Prepare Your Business, Life, and Wealth with COVID-19 Insurance
In the early 1980s, doctors around the world were dumbfounded when young, healthy individuals were dying of a rare infection.
By 1982, the CDC was concerned enough about this new infection that they set up a special task force to address this disease, and by 1983 the medical community discovered this retrovirus and labeled it HIV.
It’s now 40-years later, and although scientists have made huge strides in treatments, the world still doesn’t have an HIV vaccine.
For the last three months, we’ve watched as the world has gone into a tailspin with millions of layoffs, hundreds of thousands of people sick, thousands of deaths, and a partially shut down worldwide economy. While we hear of more and more people’s lives being shattered by this pandemic, we wait for the medical and scientific community to come up with what will hopefully be a vaccine.
We’ve been told that the vaccine should come in the next 12 to 18 months.
But, what happens between now and then? And what happens if the scientists are unable to, for whatever reason, come up with an effective vaccine? And even if they do, it’s not like they’re going to produce 7.5 billion vials to immunize the entire world overnight.
What strikes me is the fact that I’ve read countless newspaper articles about the virus, the importance of proper handwashing, and the necessity for cities to shut down, but I’ve read so little about what happens in six weeks. Or twelve weeks. Or frankly, twenty weeks.
At this stage, we know that COVID-19 isn’t going away.
And yet, we wait with bated breath for the “all-clear” that we expect to happen sooner than later.
The “all-clear” isn’t going to happen until either the world is immunized, or we’ve had herd immunization. And then, we have to hope that the virus doesn’t mutate enough to make the vaccine somewhat inefficient, or in the case of herd immunization, that you’ve got a lifetime immunity if you’ve had a prior case of the virus.
What Does COVID-19 Insurance Look Like?
The obvious answer to “what does COVID-19 insurance look like?” is … a vaccine, of course.
And in the absence of a vaccine, how are you preparing your life, wealth, income, business, health, and food supply in the meantime?
If you’re running your business under the assumption that this “thing” is going to blow over shortly and that your business will go back to normal “soon” because your government wants to open things up by the end of the month, you’re living in a “pipe-dream.”
As much as I would like to see the sports stadiums full, airplanes back in the skies, cruises at 100% occupancy, and the world back to normal, I expect that even if the government does give the “all clear” in 6 weeks, we’re going to see a concerned consumer who isn’t going to go to the sports dome, cruise, airplane, crowded bar, or restaurant anytime soon.
Things may open up somewhat in the next few months, but life isn’t going to go back to the way it was for a long time. And even if we had the miracle vaccine provided overnight to the entire world and everything was back to normal, we’ve done so much damage to businesses and many consumers that things won’t go back to normal for a while.
Have you prepared your business for the next two years?
It’s time to consider the fact that the way things are today is likely going to be the way they are for a long time, and if anything, they will get worse before they get better.
That includes not only your business, but everything—including the food supply.
I’m already reading articles about western nations trying desperately to bring in the migrant workers they need to plant this year’s crops. Have we considered that these millions of migrants, who normally make their yearly pilgrimage to their temporary homes, might be sick themselves or not willing to travel in fear of getting sick? And then they need plane trips en masse, which have become increasingly more difficult now that air travel is virtually shut down.
I find it counterintuitive that we have millions of new employees now collecting unemployment insurance who would otherwise be able and willing to work on the farms in their own countries, and yet, our governments are struggling to figure out ways to bring in temporary workers from overseas.
So let’s assume that this year’s crops are short by some significant percentage. How are we going to feed the people of the world, especially since many of these export nations, who otherwise would ship millions of tons of grains, fruits, and vegetables, will now need to keep these crops in their own countries to feed their own people?
The title of this article is: Prepare Your Business, Life and Wealth with COVID-19 Insurance.
When I say COVID-19 insurance, I’m speaking about self-insuring your life, wealth, and business, and inoculating these things as much as you can in the likely event that there will be disruption for the foreseeable future.
With regards to your business, if you’re struggling with a major decrease in sales, you should assume that you need to do a major pivot now to survive. If you’re sitting there hoping that things will return to normal, and soon, then I hate to be the bearer of bad news, but it won’t be soon.
What things can you do to your business to help you survive?
And then, how about your health?
Yes, you should be careful. Wear a mask, don’t touch your nose and mouth. But, there are many things you can do today to protect yourself so that should you get sick, your body is potentially better prepared to handle the sickness.
You can lose weight. You can start exercising. You can improve your muscle mass, body tone, diet, fruit and vegetable intake, cut down on junk food, and improve your overall health. Those are all things you should do anyway, but, now so more than ever.
If you’ve conditioned your body to be somewhat physically resilient, it isn’t a guarantee that you won’t end up in a hospital, but if you do, and you’re in good health prior to going in, then your body will be that much better prepared to handle the sickness.
And your food supply?
Let’s assume as I mentioned above, that worldwide food shipments will decline at some point in the near future. Are you prepared to handle that?
How about your cash?
When I started this article I mentioned that your cash is your best insurance policy to protect against a personal disaster like a job or business loss. Hang onto your cash. I can comfortably say that cash isn’t trash, and if you didn’t agree with me on February 17th, then I’m hoping you do now. Not only is cash not trash, but, in the next few months, you’re going to start to see business opportunities that even a few months ago would have been unthinkable.
And your investment portfolio?
If you put 100% of your assets into Carnival Cruise Line stock, then you’re not in a great position at the moment. If you have a diversified portfolio with some real estate holdings, cash, and equity with a stream of passive income, then you’ve potentially somewhat inoculated your portfolio.
Gold is an excellent store of value and has gone up over the last month.
What happens when you have proper asset diversification with your assets in multiple currencies, geographies, and somewhat uncorrelated positions is when X goes down, Y could be stable or be going up. Not everything has crashed in this market dump. There have been many assets that have done extremely well and many positions that will continue to soar in the next few years.
I wish I could sell you COVID-19 insurance to make this all go away. I clearly can’t. But, you can prepare for the possibility that this could go on for another year or two. And you need to ask yourself if you’re prepared for that. If you’re not, then what can you do now?
Holding cash is your personal insurance policy against losing your job or business. Looking after your health, wealth, cash, food, and mental health are all things you can do now, so that you’ve prepared yourself and your family as much as possible. It’s called self-insurance, and it’s your best defense against COVID-19 fall-out.
Good luck, and stay healthy.