Insurance – Is It A Necessary Evil?

We have been focusing a lot on cost cutting in these difficult times and one of the areas that I want to encourage you not to cut is insurance.

Now, before we go any further let me reassure you that I am not a great fan of insurance companies.

The main reason is that after convincing you of the need for insurance and the time for a claim arises; suddenly they do not wish to pay and find all clauses in the contract to support their position.

In particular I find that for life insurance 7 out of every 10 agents will sell you a policy that you don’t need and will fail to explain to you how the policy operates.  In addition 9 out of every 10 persons do not understand how their policy works.

In spite of these reservations there is a need for insurance in these difficult times.

The main reason is that unless you put aside the funds that you would have used to buy insurance, most persons find themselves without money at the time of their greatest need.  It takes great discipline to put aside money for those difficult days when one will need it.  Most of us will spend it on other things forgetting the main reason for saving it in the first place.

Keeping that in mind there are some things that you can do.

For general insurance and car insurance one needs to shop around as rates vary significantly from company to company.

Remember also to look at deductibles when assessing the policies as these too vary significantly. For example some policies make you responsible for the first 5% of the claim while for others it is 10%.

For the area of life insurance consider buying some term insurance, this carries no investment amount and has no cash value but is significantly cheaper than other types of policies.

Just a special caution when it comes to universal type life insurance policies which are so popular these days.  Firstly, the premium is usually only fixed for one year and the charges associated with the policy are often increased each year raising your premium payment each year.

Secondly due to the higher commission rates paid to agents the cost of the life coverage is often much higher than other types of policies.

Remember also to review your policies regularly, what you needed at one time may no longer be relevant and what you need now may have changed from what you currently have.
Finally, remember that your broker or your agent is supposed to work for you. Let them do the investigation and advise you of what will suit your needs and remember to read the contract so that you know exactly what you are getting.

Feedback question:  Do you think insurance companies are providing a good service or are they only after your money?