Consider the commonly used forms of insurance.
House. A person buys a house on a mortgage loan basis. The mortgage holder will insist on the house being insured against loss by fire. Even without the mortgagor’s insistence, the buyer would typically seek out such insurance by checking out various home insurance brisbane policies, this is just an example as it changes from country to country, state to state, etc. If the price of the house is $1 million, the perception of the buyer is that he is facing a potential $1 million loss. Willingly, the premium charge is paid, even though the risk can be handled in other ways. Kiplinger’s Changing Times Magazine has stated, “Even the individual of limited means can pay off big bills and big debts if only he retains his health and continues to earn an income.”
The house buyer wouldn’t like it, but if he or she should be unfortunate and become the victim of the statistic that in a given year, one house in every 1,200 will be destroyed by fire, the loss then is really not $1 million as contemplated by the buyer, and the loss could be managed without insurance in other ways.
The house purchase price: $1,000,000
Subtract the down payment: – 200,000
The mortgage loan to be paid: 800,000
Subtract the value of the lot: – 400,000
The real net loss: $ 400,000
The real net loss can ultimately be paid off the same way the mortgage was to be paid off, and that is with an affordable monthly installment plan.
Automobiles. Most families own several cars. The considerable premium will be substantially affected by the ownership of sports cars or having teenage drivers in the family. Statistics indicate that one out of every 250 people will have a claim on his auto insurance in a given year. Some states make auto insurance mandatory, but even without the mandating, people would seek out auto insurance. How essential is it? A $75,000 automobile is stolen and never recovered. The auto owner would not like to sustain such a loss, but if the person lives, keeps his health and continues to work and produce income, he can overcome a $75,000 loss.
If it’s a $4,000 dented fender, the cost can be put on his credit card and paid off over a number of months. Insurance is nice, but it is not necessary to overcome a $4,000 loss.
The greatest motivation to buy auto insurance is the liability protection provided by the policy. The fear of being sued and having to pay injury compensation to another person of $500,000, $1 million or more conjures up visions of loss of home and all worldly possessions. The consumer digs deep into his pocket to pay premiums on a plan that benefits others, the injured party whom the insured has knocked down in a crosswalk and broken all to pieces.
As an educational service to the consumer, it should be pointed out that the consumer could well be the person knocked down and broken to bits in the crosswalk. Upon complaint, it is discovered that the driver of the car is an uninsured motorist. The driver did not reciprocate by sending his hard-earned money to an insurance company to benefit the consumer who is now the injured party. If a consumer is sick of paying insurance premiums, then this examination of the practical cost-saving aspects of canceling the fire and auto insurance will be of great interest.
Life insurance has many uses, but from the standpoint of death benefits, there is one chance in 150 of death occurring in a given year.
With the divorce rate up to 6 out of 10, perhaps the person named as beneficiary should also be making the premium payments, in the event that love stops and reality takes over. This is said partially in jest and partially to focus the consumer’s attention on the logic of disability insurance.
Disability insurance is the last insurance that people buy, yet it is the keystone of all personal security. Disability insurance continues an income cash flow that pays for the home, the home insurance, the autos, the auto insurance and the life insurance. There is one chance in 30 that the consumer will suffer a long term disability beginning this year. And note that disability insurance is the only insurance that benefits the consumer directly!
Homeowners insurance pays the mortgage company in case of the destruction of the house, the roofer who replaces the roof or the injured party in case of liability.
Auto insurance pays the bank or lease company in the event of theft of the auto, the body shop for repairing dented fenders, and insured strangers who are damaged by the automobile in the event of a liability situation.
More Than 13,000 Diseases
A consumer would not expect to be able to buy fire insurance after his house has caught on fire. The consumer would instinctively know that it is too late for an insurance company to accept such a risk.
There is a parallel in the case of disability insurance wherein the insured person has sustained an illness or injury that makes the person a candidate for a recurrence of that prior condition. This is similar to the house being on fire. It is too late to insure against the hazard of disablement resulting from the pre-existing condition. Companies will endeavor to develop an underwriting balance that will make for an equitable offer to the insured and take into account the pre-existing condition.
There are more than 13,000 known diseases that can affect the human body. The numbers of accidents that can happen are absolutely limitless. Therefore, a standard disability policy that waivers out liability for the recurrence of a prior condition is not a bad policy. It is simply one that now addresses the liability of the 12,999 other diseases or illnesses and untold numbers of accidents.
Customarily, the underwriter will attempt to develop an increased rate in order to be able to cover the pre-existing condition, but if that is deemed to be inequitable, then the elimination waiver system will be used.
All of Your Insurance Is Important!
Consumers are not eager to buy insurance. The product has no chrome strips, no moving parts; one cannot eat it, sit on it or ride on it, and one surely would not hang it on the wall to show friends. It lies in a dusty drawer, unseen and out of mind except when the premium due notice arrives or in the event of a claim.
If there have been no claim benefits received, appreciation of the product is difficult for the consumer to manifest. Peace of mind is a dividend from an unused policy, but it is difficult to estimate such value on a dollar basis.
“I’m insurance poor” is a standard cliché offered by consumers to express their dislike of spending so much money on a lackluster product. In many cases, the consumer should be saying, “I’m poorly insured,” for most people first insure things they own, rather than themselves. Things can be replaced; the human body cannot be replaced.
All of your insurance is important, but make sure you insure the income that keeps it all in force!
