Insurance Coverages | investing strategies | insurance risk management
Insurance is never free and you should never expect it to be “profitable” to you. Unless an insurance company is poorly managed and makes excessive benefits commitments, you can never make a “profit” from an insurance company on the premiums you pay. From a strict financial standpoint, you should always expect to get less money out of insurance than you pay in insurance premiums.
In general, you are paying to participate in a risk sharing pool. That is all insurance really is. If, somehow, you find an insurance contract that seems to provide excessive benefits relative to its costs, then you better be toward the front of the claimant line, because the insurance fund will be exhausted before those at the back of the line get served. A better approach would be not to enter into any insurance contract that seems too good to be true.
Insurance is even more expensive, because it not just a redistribution of paid in premiums and the pooled financial assets of policy holders. Insurance premiums include very substantial sales and marketing costs, administrative expenses, and insurance company profit requirements. For some forms of insurance, less than 50 cents of each dollar taken in gets paid out in benefits. Insurance is like a lottery. Insurance premiums and lottery tickets are both prices of participation. Yet, with insurance there inevitably is less joy in the payout, because something rather nasty needs to happen to become a “winner” with insurance.
insurance coverages that you could buy, depending upon your needs:
- auto insurance
- business insurance for the self-employed
- dental insurance
- disability insurance and workmans compensation insurance
- earthquake insurance
- fire insurance
- flood insurance
- flight insurance
- general liability insurance
- home owners insurance / condo insurance / renters insurance
- legal insurance
- long term care insurance
- medical insurance / group health insurance / individual health insurance
- mortgage insurance / title insurance
- property insurance / boat insurance
- term life insurance / universal life insurance / whole life insurance
- unemployment insurance
- vision insurance
