The Superhero You Hope Just Sits There: The Best Thing About Paying for Insurance Is Not Having to Call on It for Help
Instead of thinking of your insurance policy as a lottery ticket with winning numbers, remember it is a boring financial contract that acts as a backstop against disaster, which is why the best claim is the one you never have.
Do you really want to "win" with your insurance?
Stick with me here, because I know how this sounds. You pay premiums every year. The bill comes. You grumble. You write the check. Then the next year comes, and you do it again. No claim. No check from the insurance company. No parade. No balloons. No oversized novelty check like you just hit the jackpot on a game show.
So it is very tempting to think, "When do I finally get something back?"
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I get it.
But here is the problem with that way of thinking: An insurance claim is not a lottery ticket. It is not a slot machine. It is not you pulling the handle every year with your premium payment and waiting for three cherries to line up.
Because when you "win" an insurance claim, something bad had to happen first.
Your house burned. Your kitchen flooded. Your car was crunched. Someone got hurt. A lawsuit landed in your mailbox. A tree came through the roof. A thief decided your belongings looked better in his garage than yours.
Bingo and cha-ching?
Not exactly.
Why your insurance just sitting there is a good thing
Insurance is one of the few products in life that you buy hoping you never have to use.
Think about that. You do not buy a refrigerator hoping it never gets cold. You do not buy a car hoping it never starts. You do not buy a cellphone hoping it never rings (although, depending on who is calling, I suppose there are exceptions on that one).
But insurance? You absolutely hope it just sits there.
Quiet. Boring. Uneventful.
And boring is good.
Let's use the slot machine analogy for a minute. Every year, you pay your insurance premium. Some people imagine that premium as the coin going into the machine. Pull the handle. Nothing. Pull the handle again next year. Nothing. Then, finally, a claim happens, and money comes out.
"See?" they say. "I finally won."
No. You did not win. You had a loss.
Translation: The insurance company did not give you a prize. It performed a contractual obligation.
That is a very important distinction.
It's a contract
An insurance policy is a contract. Not a favor. Not a gift. Not charity. Not "good vibes from a carrier." You agree to pay the premium. The insurance company agrees that if a covered loss happens, subject to the terms, conditions, exclusions, deductibles, limits, endorsements, definitions and all the other exciting bedtime reading in the policy, it will pay what it owes.
I know. That sentence was a lot.
Translation: You pay your insurance company, and if the covered bad thing happens, your insurance company steps up.
That is the deal.
Now, does every claim go perfectly? Of course not. I am an insurance professional, not Willy Wonka. I do not live in a factory where rivers of chocolate solve coverage disputes.
- Claims can be frustrating
- Claims adjusters can be slow
- Estimates can differ
- Coverage questions can get complicated
- Deductibles can surprise people
- Sometimes companies get it wrong
But the basic idea matters: A claim is not a bonus. It is the policy doing its job after something you did not want to happen happened.
Here is another way to think about it. You pay for fire extinguishers, smoke detectors, seat belts, airbags, alarm systems and maybe even a home security service. If the smoke detector screams at 2 in the morning because there is a fire in the hallway, do you say, "Fantastic! I finally got my money's worth!"
I hope not.
You say, "Get everyone out."
Then, later, when your heart rate slows down, you may be grateful the smoke detector worked. You may be grateful the fire department came. You may be grateful insurance is there to help put things back together. But you are not celebrating the fire.
Same thing with insurance.
The claim is not the good news. The coverage is the good news.
Big difference.
And that brings us to another common mistake: Measuring the value of insurance only by whether you filed a claim.
"I paid for 10 years and never used it."
Good.
Really good.
Your very own lazy superhero
If you paid for homeowners insurance for 10 years and never filed a fire claim, that means your house did not burn down. If you paid for auto insurance and never had a serious accident, that means you were not injured, sued or stranded on the freeway exchanging information with someone whose first sentence is, "I didn't see you."
If you paid for liability insurance and never got sued, congratulations. That is not wasted money. That is peace, stability and protection sitting quietly in the background like a very boring superhero.
No cape. No theme music. Just there.
The purpose of insurance is not to make you richer. It is to keep a covered loss from making you much poorer.
That is the part people miss.
Insurance is not designed to be an investment account. It is not a savings plan. It is not a casino. It is risk transfer.
Translation: You are taking a financial risk that could be too big, too sudden or too ugly to handle alone, and you are transferring some of that risk to an insurance company in exchange for premium.
That is why the premium exists.
And yes, premiums have been going up, up, up. Especially in California. Homeowners insurance has become harder to find, harder to keep and harder to afford. Auto insurance is not exactly throwing a discount party either. People are frustrated, and I do not blame them one bit.
When the bill gets bigger, the temptation to say, "Well, I better get something out of this," gets stronger.
But again, what does "getting something out of it" mean?
If it means your house burned and the carrier helps you rebuild, that is not a lucky day. That is a terrible day with a financial backstop.
If it means your car was totaled, but the policy responds, that is not a jackpot. That is a bad day made less financially destructive.
If it means someone sued you, and your liability coverage provides defense, that is not winning the lotto. That is the contract showing up with a lawyer when you really, really do not want to be alone.
Insurance is the friend who answers the phone at 3 a.m. Not because you are having a party. Because something went wrong.
What insurance is good for
So what should you want from your insurance?
First, you want the right coverage before the loss. Not after. After is too late. You cannot buy fire insurance while the flames are already taking a tour of the living room.
Second, you want limits that make sense. The least-expensive policy may feel good on billing day, but it will feel terrible on claim day.
Third, you want to understand your deductible. The deductible is your part of the deal. It is not a surprise cover charge at a restaurant. It is in the contract.
Fourth, you want to know the exclusions. Exclusions are the policy's way of saying, "Not this." Boring? Yes. Important? You betcha.
And fifth, you want an agent who will tell you the truth, even when the truth is not wrapped in a bow.
Because the right question is not, "How do I get my money back?"
The right question is, "If something terrible happens, will this policy respond the way I need it to?"
That is the whole ballgame.
You don't have to love it
Listen, I am not asking anyone to love paying insurance premiums. I have been in this business a long time, and I have yet to meet someone who frames their renewal bill and hangs it over the fireplace.
But I am asking you to look at insurance for what it is.
It is not a lotto ticket.
It is not a slot machine.
It is not a prize.
It is a promise written in contract language, backed by dollars, regulated by rules and tested when life decides to throw a brick through your plans.
You do not buy insurance because you want a claim.
You buy insurance because, if a claim happens, you do not want to face it alone.
So the next time you pay that premium and nothing bad happens, try this thought instead: "Good. I hope I never need it."
Because the best claim is the one you never have.
Want to learn more about insurance? Visit KarlSusman.com.
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