#insurance #HomeRepairInsurance #CarRepairInsurance #IDTheftInsurance

In the history of insurance, policies covered driving, home ownership, health and life. 

Now, we have insurance for home appliances, car repairs and identity theft. 

In ads for home-appliance and car-repair coverage, the actors talk about how much money they saved. Yet, there is no mention of the coverages’ costs. 

So, one has no way of knowing how valuable that coverage is. 

In advertising parlance, the ads are not trying to sell you the value, they are only trying to get you to call, or go online, for more information. 

The ads make one wonder whether explicitly detailing the cost AND benefits would make the products economically not viable. 

Insurance is a tricky business. Insurers have to constantly balance profit and losses. 

Why do insurance stocks go up AFTER natural, or even man-made disasters? Investors figure the companies have already calculated the losses, but they now have the excuse to raise premiums for everybody.

Health insurance is a somewhat different animal. When it was first created, health insurance was only designed to cover catastrophic illness or injury. As companies tried to lure employees, or, perhaps, avoid giving raises and instead compensating with benefits, health insurance evolved into covering day-to-day medical treatments, prescription drugs etc. 

When at one time a primary care physician could charge, say, $10 for a visit, those visits now costs hundreds. Certainly, medical staff salaries and other costs have risen, but having insurance to pay for those things likely contributed to rising costs.

Later, some employers decided to self-insure their employees’ health, thus paying care providers directly and avoiding insurance company profits. 

Now, health care costs have risen to the point that fewer employers are offering it as a benefit. And, trying to get individual health insurance has become cost-prohibitive for many folks. 

So, innovators – mostly for non-profit organizations – invented health–sharing networks, a non-insurance product that allows people to contribute regular share payments based on their personal situations, and get some or all of their health care bills paid. These networks usually don’t take a cut of those payments for themselves, and the good ones also negotiate individual health-care bills to reduce them.

Talking about the latest insurance products, one has to wonder how much one has to pay to cover auto, home or appliance repairs.

To use round numbers, if you pay $50 per month for the coverage, that’s $600 a year. Most major car repairs are well into four figures, so it could be economical for the policy holder. One covered repair could be more than the premium. 

But if you have no car repairs in that year, you’ve spent $600 and gotten nothing back. If you go years without a major car repair, you’ve paid premiums with no return. 

One has to wonder whether a person who cannot afford an expensive car, home or appliance repair can afford paying premiums with no return. 

It’s admirable that innovators are creating products that attempt to make one’s financial life better. But, before buying one of these products, it’s best to do some math to see whether it will be worth it in the long run. 

Peter