Insurance (What Is It Good For?)

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Many of us can recall the Vietnam-era hit “War (What is It Good For?)”. “()”; this soulful song is reputed to be one of the most popular political songs in history. It captures the spirit of a generation in one catchphrase and was so well-received. If I could spin-off that catchy refrain, I might also successfully capture a mood prevalent among a generation of insurance buyers: “Insurance–huh–good god; what is it good for?” It would be an overwhelming “Absolutely Nothing!”

This is true up to the point that you file a claim. This is where the greatest hurdle lies in speaking to people about the importance and benefits of insurance. People who have had to deal with a significant amount of fire, theft, or other calamities, will be able to attest to the benefits of insurance for their homes and businesses. There might be five policyholders who have not filed a claim for the same reason. Claims Journal reported that only 8 percent of U.S. homeowners filed a property claim. All I hear is the following: If we spend all our money on insurance, whether for our home, business, or auto, but we have never had any claims. What’s it good for? (Absolutely nothing?)

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Does it really hold true that insurance premiums are not returned if you don’t file a claim? Are you getting any benefit from the insurance policy that you purchased? Have you bought without any real benefit? Although it may seem that way, the truth is that it’s not.

Even though an insurance salesman may sympathize with the fact a buyer only has a piece paper in their hands after they have paid premiums, that piece is still a huge promise. This piece of paper is a binding agreement. The insurance company and policyholder agree to restore financial health in the case of financial disaster. This contract guarantees that someone will help you regain your feet if you are hit hard.

Think about how you could protect your assets by yourself. Imagine you are looking to buy a $200,000 house. If you want to be able replace the asset in case it is accidentally destroyed, you should save $400,000 before buying. You could also pay $700 per year for homeowner’s insurance and still have the same ability. This is the power that insurance policies give you. You can own your home, and you have the ability to make repairs. You can do it all now, not years later after you have saved a lot.

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This is how one speaker described it. A client complained that they had bought insurance from him for years but never used it. The speaker responded, “Well, if I’ve got a gasoline can and a lighter,” because he knew exactly where they lived. Although I don’t remember the exact words used by the speaker to reply, it was a concise way to prove a point. Insurance is like a handgun we purchase for home defense. We hope we won’t need it. No one wants to test their home defense weapon. Even if you don’t have to shoot an invader, it is a fact that you have purchased the gun and have the capacity to do so. That capacity, huh?–is what insurance does. It’s true, you can repeat it!