My view on Insurance
Posted on: Tue, 2006-10-31 02:46
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My view on Insurance
Sometimes people ask me what I think about this or that travel insurance. Usually I am not giving advice, since I want to deny all responsibility, but here is what I really think about insurance:
Insurance companies exist for one purpose alone, to make money. They are buisinesses and as such all they care about at the end of the day is the bottom line. There is nothing wrong with this, all businesses operate like this one way or another.
The result is, that I do not buy insurance if loosing the item doesn't bancrupt me (so this already takes care of homeowners insurance, boats or other large items) or if it is required by law (cars are a good example). All my other belongings are not insured and I don't insure my travel itinary.
My reasons:
When you shouldn't buy insurance:
Considering that Insurance companies want to make money, they do a lot of statistics. They figure out how likely it is that somthing happens (maybe based on demographics, area and a whole bunch of other factors). Then they take this number and put a decent markup on it (which is their gain). This is how they determine what the insurance will cost you. Believe me, no insurance exists for your sake!
Now if I don't pay insurance, I effectively become my own insurance agent. I make money (the money I save not paying insurance) and I pay claims (if I loose or break something or if it gets stolen I replace it). The first obvious benefits are:
- No claims forms
- No mark up
- Every claim gets filled (no dispute)
But here comes the real reason. Because I don't mark it up (I have no agents to pay, no shareholders to please ...) I will eventually come out ahead of the curve, even if I cause just average damage. Over time I will spent less money on replacing things than it would cost me to pay insurance for anything (this is the difference that makes up the profit of the insurance company).
The obvious drawback: The averaging over time is where this can get you. If you incur heavy losses at the beginning you will take a long time to recover. Since I have been doing this for a long time, I have already saved enough money to replace a few items.
In order to do this, you need to be able to afford to replace any item you would insure otherwise from the first day on! Then take the money you would pay the insurance and add it up in a spreasheet. After just a few years, you will see that you have already saved enough to replace the some items (rearely all get damaged at once) so you will actually start to be in the plus.
The same applies for travel insurance. Unless I am unsure if I can go on the trip for reasons other than sickness, I rarely ever consider it, betting on the fact that I am so much less likely to get sick. Considering that it would cost me 5% of the trip (you can change the numbers), I can beat the average if I don't get sick less than 1 times out of 20.
When you should buy insurance:
- You cannot afford to replace the items on your own
- Your business depends on the items and you cannot afford to replace them
- You get sick often and are more likely to not be able to travel (Insurance companies might deny your claim)
- It is required (cars, buisiness)
- Other people depend on it (Lifeinsurance?)
- You think I am full of sh*t
Hope this made some sense.
Andre
I have noticed that in countries other than where I am now, having an insurance is very common and popular. I didn't expect Andre to be thinking this way of insurance and insurance companies. Nevertheless, in our country, people are slowly doing away with insurances because of the fact that even the best educational insurance before has become bankrupt now. So, we're thinking: how much more for those which aren't that famous before? What assurance can we have that by the time we need that money, the company is still existing or is still paying their members?
Right now, people are wary and tend to use their money more for businesses, being self-employed, trying to find ways to get residual income later on. But of course, the risk is there, but what about insurance? There is still a risk. For me, if I can find a way to increase my money, I'd rather not have any insurance at all.
I am starting to agree with Andre about Insurance. I was always under the influence that it was a must and you should'nt travel with out it. But it is just getting to expensive and the amount of times we have travelled we have not used it once. The insurance companies are making a mint out of us. Maybe they should have a thing like our contents insurance called Real Insurance. If you dont make a claim at all every three years you get so much of the insurance payments back in cash.
Please remember. It only works if you can afford to loose or replace something that you would insure otherwise.
Over time you will have saved enough money to justify this, but when you are going without insurance for the first time, you still need the bankroll to back you up.
It's a pretty funny (and interesting) concept.
Yes I agree! Insurance rates are crazy. Usually, by the time you figure up how much you have spent on insurance over a period of a few years you would have been better off just to thow your stuff away and buy new. At least then you would actually have something to show for your money.
Of course there is always "Murphys law". If you go without insurance something bad will happen, but if you buy it nothing happens.
As Andre has pointed out it all just boils down to hard it would be to replace whatever it you are considering insuring.
I must be very convincing.
I was actually expecting everyone to disagree with my views. Everyone is always so eager to buy insurance.
Andre
Travel Photos
Not me! I am just now going through some hassles with my auto insurance. I am 44 years old and have never filed a claim yet I have to keep paying. I recently moved to a new place and, supposedly, because this area is a 'higher risk' my insurance rate almost doubled!
Car insurance is the one insurance you can't do without (it's even against the law).
I understand your frustration. Just because a lot of idiots live in your area that are more likely to smash their heads on their windshield means you have to pay more.
Andre
Travel Photography
Hi dude... Really excellent work! This tips is helpful to everyone and thanks for sharing this information with us...