There are many types of insurance that a business should consider acquiring
for the possible protection of the owner/operator: the business itself;
the customer; the employee; the landlord; and those known as "third
parties".
Insurance is the business of protecting against loss. Loss is that which
is the basis for a valid claim for recovery under an insurance policy. A
catastrophe is something which brings a failure, a disastrous end or ruin.
Every business should protect itself from catastrophe by purchasing insurance.
It should attempt to insure against loss up to the catastrophe level with
as much deductible as is economically sensible to take. The level varies
with every business, and is a definition of finance, activity and conceived
loss. Deductible is that first part of the loss that the customer absorbs:
the insurer starts paying thereafter. It is likely that 80% of claims fall
in the first 20% or less of coverage. It follows that deductibles should
save considerable premium for the customer and operating costs for the insurer.
Shop for deductibles. They don't apply to life policies.
Insurance companies have been with us for a very long time. They are, by
their existence, profitable. They are in the business of making money. To
remain in operation, they must make money. There have been exceptions to
the rule, caused mainly by unique, greedy and incompetent management.
The theory of insurance is the same for every type: if coverage, risk, age,
gender, premium and expiry are the same then, at the end (all are dead or
there is no further risk) all of the premiums plus their earnings (less
an amount for administration) would have been paid out to those insured
and nothing would be left. All would come out even at the end. The reason
that insurance companies continue and prosper is that they keep selling
insurance, thereby never reaching the ultimate day of reckoning. They use
actuaries who try to see into the future to smooth out the bumps caused
by errors in estimating factors used in computing premiums.
Life insurance is different from the others. It may be sold with an additional
premium built into it that is accounted for like a bank savings account.
The insurer holds that extra money, pays interest (sometimes called dividends)
on it and collects the amounts together, calling it the Cash Surrender Value
(CSV). The problem with this type of insurance is that, when you die, as
you always do, the policy pays its face or insured value which does not
include that CSV. Never buy other than TERM life insurance, except under
very unusual circumstances.
Life insurance companies tend to set their rates with regard to the age,
health, etc. of the groups of persons insured, while general insurance companies
tend to relate more to exposure, amount of coverage, location, type of risk.
In days gone by, general companies would limit the amount of coverage that
they would sell to you, thereby limiting their potential loss. As a group,
they tended (and tend) to have available very few meaningful statistics
on which to base risk parameters. Their attitude toward the premiums that
they hold is that they belonged to the company, not the insured. As a consequence
there was (and is) a constant battle with the company to settle claims on
a mutually satisfactory basis. When inflation arrived and money seemed to
be more plentiful, they made two crucial decisions which resulted in astronomical
profits: the coverage limit was removed with replacement value substituted;
and premium rates were increased.
Today the companies are trying valiantly to recover their tarnished image.
The old loyalties that customers had to them have significantly diminished.
Banks (who don't even bank well for their small customers) are attempting
to get into the business on the premise that they are better able to relate
to the customer! Can you imagine two economic giants fighting with each
other over our emaciated carcasses? It is happening. Lets hope that insurance
companies start banks. We can only win!
The day will come when most insurers will sell their wares directly to the
customer as opposed to the current system of using brokers/agents. In the
meantime, your best friend in the game is your local small broker/agent.
To stay in business, he (or she, or are we all "its" in the name
of political correctness but social stupidity and ignorance) must be more
attuned to helping and serving you rather than only being a representative
of the companies. The knowledgeable local small broker/agent is your one
and only friend in the real world of insurance. See it first.
IF AN INSURANCE ADJUSTER, SENT TO YOU BY THE INSURANCE COMPANY, ARRIVES
AT YOUR DOOR AFTER YOU HAVE REPORTED A REAL OR POTENTIAL LOSS, AND TELLS
YOU THAT "I WORK FOR YOU AND NOT THE COMPANY", DO NOT BELIEVE
IT.
THE ADJUSTER'S JOB IS TO MINIMIZE THE COMPANY'S LOSS, NOT TO INCREASE YOUR
SETTLEMENT. IF YOU ARE NOT CONTENT, THEN SIGN NOTHING AND THINK ABOUT HIRING
YOUR OWN LOSS ESTIMATOR. SOME POLICIES WILL EVEN PAY FOR IT.