Friday, November 22, 2013
Fear sells insurance
Most people need several types of insurance coverage. Health, life, disability, and auto are a few examples. Insurance has a purpose in any good comprehensive financial plan. Most of us can't handle the big unexpected misfortunes that could come our way all by ourselves. What I've noticed though with TV commercials, and in particular with car insurance, is they come up with scenarios that would almost never happen in regular old boring life. What these commercials do is act out these far-fetched things that would almost assuredly never happen. I look at insurance as a pain. You pay money every month for something for which you see little real benefit. Take car insurance for example. No one would want to get in an accident in the first place, but if you do the insurance is supposedly there to help make you whole or indemnify you. You pay the money every month, don't get in any accidents, and the insurance company pockets all the money as profit. It's hard to think of another business like that. I carry pretty high limits on my auto for the most part because of our legal lottery mentality society. I don't like paying the bill every month though. I don't even like that I'm forced to have a car by society's structure. When I pay money for food I actually get something physical and useful. Not so with insurance. I do not have comprehensive and collision coverage because if I was at fault and my car was totaled the amount I would get would not be worth the premiums I would be paying. Then of course there are the advisors and sales people who combine insurance and investing. I have never been for this course of action. The way I see it is the fees are way too high for the investment and commission portion of it. I look at insurance as protection and investment as a vehicle to grow your net worth. It's best to keep them separate. This is one of the problems of the "financial planning" field is that a lot of times it's just sales people hawking products. That to me is not planning it's sales. The two biggest words in the insurance business are what if. Life has a lot of what ifs. There's no doubt about that. I say it's best to make sensible insurance policy purchases and not be driven by fear. And remember you have to get the money from somewhere to pay for the insurance. It usually comes from working a job. Respect your one life you have to live. Do your research and don't buy insurance you don't need. Don't let these fear driven advertisements peddled by the insurance companies push you to do something that's not in your best interest.