It’s critically important to understand that insurance is not a transfer of risk. You bear the consequence of a sudden loss, and all insurance does is pay for losses as spelled-out in the contract that you and an insurance company mutually agree to. So insurance is risk financing and not a transfer of risk. Nowhere is that more obvious than in situations where your policy either doesn’t cover a particular loss, or you run out of insurance because the value of the loss exceeds the limit of coverage.
So you can’t get rid of risk, but you can establish expectations of how your financing plan (insurance) performs, and we believe those expectations should hinge on 3 points:
- Scope: every insurance contract spells-out exactly what losses are covered and what losses are not going to be covered. So the question for you is, how far do you want your insurance to go in what is covered?
- Scale: every insurance contract spells-out exactly how much of a loss is going to covered. So the question for you is, how much of any particular loss do you want your insurance to pay for, and how much do you want to pay for yourself?
- Delivery: every insurance company delivers on their promises differently, based largely on corporate culture and managerial decisions. So the decision for you is, how professionally do you want the promise of coverage delivered?
It’s my experience that most folks fail to concern themselves with these 3 points, and jump instead to “how much does it cost”? Your bad insurance-claim experience starts on the day your buy your insurance, and buying a $1 hammer when you needed a $2 shovel is a good way to eventually have a bad claim experience.
I believe most bad claim experiences happen because consumers don’t know/believe that there are differences between insurance policies and insurance companies. So either do your research, or ask a counselor like me to help you with some education and decision therapy.
Photo: Reykjadalur, Iceland
Darren McGraw & Mechelsen Private Client 