Insurance: The invisible product…until it isn’t.

It is easy for someone to spend six dollars on a cup coffee.  Many people don’t bat an eye at the purchase of a forty thousand dollar car.  Others might feel exhilarated after buying a new million dollar home!  However, if you ask someone if they are happy spending even a fraction of that amount on the insurance needed to protect it, the answer is almost always an emphatic NO.

Why the lack of fulfillment when purchasing insurance products?  Unlike the examples above, you can’t see, feel or touch the insurance product and therefore gratification is hard to achieve.  In fact, not only do people not have fulfillment after purchasing insurance, most feel as though they are wasting money on something they are never going to use anyways.  To make matters worse, the insurance industry has focused their immense marketing dollars to convince everyone that all insurance is the same and saving money is the primary goal of the purchase.  It is an invisible product so you might as well save money where you can, right?!  Well, it is an invisible product…until it isn’t.

After a loss, the insurance becomes VERY visible.  A few examples of how this vision takes shape include,

  • Finding out that you can only replace a portion of your hardwood floors even though it will not match the flooring in the room next to it.
  • Explaining to your spouse that you don’t have any coverage to pay for your recently finished basement flooded by a sewer backup.
  • Getting a check for your totaled car that is $7,500 less than you paid for it 12 months ago.

The scenarios above are just a few of an almost infinite amount of details that could surprise you after a loss.  Unfortunately, most people who place a stronger value on the insurance purchase up front already discovered the dark side of these details first hand in the past.  For some, it was simply an annoyance while for others an uncovered loss may have caused a significant financial issue.  So how can you learn from the lessons of others?  Below are a few questions you should ask yourself and your insurance provider,

  • Do I even know what my policy coverages mean?  If you don’t, then how can you know what you are buying?!
  • Are there any significant limitations or exclusions in the policy that I need to be aware of?
  • I am still insured with the same carrier I was when I had an old car and lived in an apartment…does this coverage program still fit me now that I have a family and have moved into a larger home with newer cars?
  • Is my advisor tied to one company and product or are they able to represent my interests objectively with a variety of options?

While these are just a few of the questions you could be asking, at least they will help to start the conversation….and that could be worth much more than your cup of coffee.

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