Insurance has always been somewhat of a paradox. It’s one of those things that everyone needs, but nobody ever wants to talk about or even think about. It’s an actual contract, so it can be overwhelming and confusing, with lots of fine print and legal jargon to keep your head spinning.
There used to be an old joke circulating around with the underlying gist of: which three types of people would you never want to be trapped in an elevator with – and one was an insurance agent.
Maybe it’s because an insurance policy is an intangible and rather unique enigma – it’s something you spend money on, but actually hope that you never need to use it. I suppose it’s only human nature that we all want to physically see, hold and touch something that we’ve paid for.
Just before returning to The Columbian-Progress last November, I spent the past three and a half years working as a licensed insurance agent selling and servicing property, casualty and life policies.
The process of obtaining my license, along with the actual experience of interacting with customers, was an eye-opener and gave me a much better perspective and accurate opinion on insurance.
I used to share the same opinion as many others about insurance (especially auto and home) – that it was only an extra cost being imposed on me for some invisible coverage, mainly designed to protect the bank or lender who had a lien on my property.
I never really considered or focused much on the aspect of how much that policy could benefit me, should I ever have a claim and actually need that coverage to apply. That is, until I eventually had my first accident – that’s when reality kicked in, and I grew to appreciate its value.
When our two kids began driving, I became even more of a staunch supporter of insurance. The premiums were definitely expensive, and it was often hard to afford. We generally kept them driving cheaper and older-model (non-financed) cars that didn’t require carrying full coverage, but even the basic state-mandated liability coverage wasn’t cheap.
It’s all directly linked to their “driving age group” being rated with a statistically higher risk factor. If you’re lucky, your teen driver will avoid any crashes, or at least have only a minor fender-bender. But trust me – it’s usually not a matter of if, but when, a teenager has an accident.
When you really think it about it, the whole idea of insurance is rather fascinating. The underlying theory and design of a large volume of people who pool their money into a central fund, but wager against the odds of fate that they’ll never need to individually file a claim, is a unique concept.
Believe it or not, the insurance industry is an ages-old phenomena, with ancient forms of it dating back to medieval times more than 3,000 years ago and was primarily based on the risks involved in sea travel, marine activities and cargo transportation.
The first documented insurance “contract” was from Genoa in 1347 and within the following century, became widely practiced among business transactions. By the 1600s, insurance policies had evolved to cover many more areas such as personal interests including property and peoples’ lives.
The first recorded American insurance company was called the Philadelphia Contributionship. It was co-founded by Benjamin Franklin in 1752 and became the benchmark for much of how the industry operates today.
Today, all of the actuaries and their sophisticated algorithm programs that have been developed to identify, measure and track assorted risk factors are arguably some of the most complex and impressive systems in modern technology.
The general definition of “indemnity” is to make whole again. An insurance policy was never meant to make a policyholder better off than before or to create a profit situation. It’s strictly intended to serve as a mechanism to accommodate the replacement of or compensation for the loss of what’s covered by the policy.
The mere risk-to-value ratio (premium cost vs. potential benefit) can often be an extraordinary motivation to consider insurance coverage and can bring a certain degree of comfort and peace of mind. Although premium payments can feel painful and sometimes seem like a waste of money, just remember that a single claim settlement can often be worth several years worth of premium payments.
For instance, a single full-coverage auto policy with a premium of $84/month would cost $1,008/year. Just one accident, depending on the vehicle’s value, the crash circumstances, etc., could result in a settlement of several thousand dollars. So a $30,000 settlement would equate to nearly 30 years of premium payments. That kind of scenario makes a policy much more worthwhile.
Here are a few common rituals I follow every year:
*Review each policy for accuracy and proper coverage (not under or over-insured). Some things may increase or decrease in value over time, so it’s good to stay updated.
*Make sure that all possible discounts you qualify for are being applied to your policies. These may range from multi-car discounts, payment options, owners’ ages, good grades, no-claims history, etc. Always check to be sure, as these can add up to a lot of savings.
*Shop around. Keep a copy of your policy declaration pages (usually the first couple of pages that list the specifics, description, coverages, deductibles, etc.) and send out for quotes to get best pricing.
*Home policy: verify with your agent that your home is based on the correct Fire Protection Class rating. The lower the FPC rating, the cheaper your insurance cost. Fire departments are often re-rated when they make equipment and training improvements (for instance, they may go from an FPC-8 to an FPC-7), which could lower your annual premium by a few hundred dollars. This change is not always adjusted on your policy, so it’s worth a call to your agent to confirm it.
Since I have several friends and family members in the insurance business, I have no intention of endorsing or promoting any specific carrier or company. But I can sincerely tell you that if you’ve ever had any reluctance or anxiety about obtaining an insurance policy to cover something that’s valuable to you – it definitely warrants consideration.
Danny O’Fallon is the publisher of
The Columbian-Progress. He may be
reached at (601) 736-2611 or
dofallon@columbianprogress.com.
