Most adults either possess or desire to possess insurance. It’s a natural pull. We want to be sure that in the case of an unforeseen disaster we won’t lose everything. We love our things above all.
In January 2010, I totaled the first car I had ever purchased. I had paid $12,500 for her only six months before, and I only had buyer’s remorse for an hour or two. After I waited two weeks to fill my gas tank–she was a hybrid–I was completely and forever in love. She showed me her cool features (braking energy converted to battery power! woohoo.) on a daily basis, and I drove her cautiously in return. Then I had an accident. What did insurance pay for? Just about everything. I paid a $500 deductible (pretty standard if you have middle of the road insurance) and they sent me a check for $11,500 to buy a replacement. I went out and bought an antique for $1000. Thanks, USAA.
So why do we have insurance? To bail us out when we muck things up. But is it really worth it? Couldn’t we just put money under a mattress for a rainy day and pull it out when it’s pouring buckets?
I would argue that insurance is usually not a great investment. By usually I mean that most people throw money into an insurance vacuum once a month and never see any return. They are either not prone to accidents or fortunate. Or they are fortunate enough to be wealthy enough to lack need for insurance.
If a homeowner puts $804 per year (the USA national average) into an insurance account, that means that they will give tens of thousands of dollars to someone else over the course of a few decades unless a tree falls on the roof or the place burns down. Why then, does almost everyone who can afford it pay for it? Because they’re scared. We’re all scared. In the case of a fire or tornado or Sarah Palin sighting, what is a poor little homeowner to do in the face of 100,000 worth of damage? 200,000?
We buy insurance so that we can share costs. It’s a beautiful marriage between communism and capitalism. A lot of people help each other out, and somebody makes a profit. How much profit? Depends on whether or not it’s a “mutual.” A “mutual” is an insurance company that is owned by its customers (and possibly investors as well). This means that if a company pays all its bills and covers all other expenses (employee pay, taxes, etc.) it will reimburse its customers according to how much they purchased. If an insurance company is not a mutual, it is a scam. The only beneficiary of a non mutual insurance company is investors and upper management/board of directors who benefit from big profits. My advice? Get insurance through a mutual/worker owned/not for profit. Single payer health care, anyone? Bum bum bummmm.
The Age of Vacqueras 