Why does insurance cost so much?

We often think insurance is a good idea, but we believe it costs too much.

Insurance agents and companies have a bad reputation.

Why is this, and what do we make of it?

Everyone buying insurance wants to get a good deal.

We all want to pay as little as possible, and we all want to have a good chance of collecting insurance benefits well beyond what we pay in premiums.

But if we all collected more in insurance benefits than we paid in premiums, insurance companies would go under. We need to ask whether our expectations are reasonable.   

Most of us only want to think about considering “our own bet” against the evil insurance companies, and not against people like ourselves, just like us, who also want to get a “good deal” with insurance.   Is there a better way to think about this?

The whole concept of insurance is that risks are pooled so that a bunch of people pay a premium, and those who have something terrible happen to them receive benefits, while others who end up okay, don’t collect benefits.

All insurance buyers cannot “win”.

So, one answer to why insurance is expensive is that insurance provides value – to those who truly have a loss.

If something bad happens to you or others like you, insurance should provide a benefit. But when bad things don’t happen, insurance buyers should not get to collect on their insurance.

Another reason insurance seems expensive is that insurance companies need to be absolutely positive they can pay all their claims.

So, they need to have a cushion in case things go wrong.  

Figuring out the appropriate size of that cushion is something government regulators and insurers work on together.   

Too small, and an insurer could have financial problems.

Too large, and cash reserves pile up, and make insurance more expensive than it should be.  

When you boil all this down, it again becomes a personal choice we all need to make. 

Insurance makes sense conceptually, but when we see the price tag, often the buying decision becomes complicated.

Karl can work to help you clarify the questions and issues in your mind, so that you have confidence as you consider insurance buying questions.

I hope this information has been helpful for you - but I’m sure you still have additional thoughts or questions.

Give me a call at 503.902.5320 or reach out through my website so that we can set up some time to go over your situation and work on coming up with the best solution for you.