Do as I say, not as I do.
Shoot first, ask questions later.
Hurry up, the light turned yellow!
Have you noticed how backward our world is? Today, I thought we’d gab about one of the things that strikes me as one of the most backwards of all: insurance.
Insurance, in a nutshell, is us betting a company that something terrible is going to happen to us. We believe in that so strongly that we actually pay a company gobs of money for countless years to protect us at that possible terrible moment.
I always thought of insurance as a bit odd, but my sense of the bizarre was ratcheted up during my tenure at a multinational company in their corporate accounting area. I was put in charge of tracking and reporting on COLI (Corporate Owned Life Insurance), which is insurance taken out on key people within an organization as deemed important by the company.
The company received a benefit on their “investment” when an insured died (just like you and your family). The backwards part of this was that the younger a person’s age when they died, the higher the net benefit (conversely, at some point, the benefit reversed itself if the insured lived a long life). To me, this felt ghoulish, showing a “benefit” from someone dying young. Not that anyone in the company was rooting for people to die early, but the amount of the benefit to the bottom line could be significant.
It occurred to me that all insurance seemed to be a “bet”, with the insurer being the “house” and the insured acting as the “player”. Cash out early (pun intended) and the insured made out well; stay too long and the house wins every time.
From that point of view, you can almost rank insurance from the “safest” bet to the most risky. Think about it a bit and see where you would rank these types of insurance. My rankings are listed below, in order of least backward to most backward, with a poker twist.
Medical insurance – the odds are more in your favor as you age, but it’s still a reasonably safe bet you could use this if you’re active. This is a full house (especially if you have a full house).
Car insurance – from shopping carts to crowded streets to hail, the opportunity for damage is everywhere, but something major? What about all those years as a safe driver? Call this a middle straight.
Dental insurance – unless you know you have problems, this is basically a low pair.
Home insurance – seriously? Absent being totaled in natural disasters, if you pocketed that annual bill every year and stuck it in the bank, wouldn’t you have enough to pay for everything? You’re dealing with maybe Ace-high garbage here
Life insurance – you’re betting you’re going to die before your hand is fully dealt! The house is holding all the cards here.
Life insurance may still be considered to be the most valuable by many to provide for their beneficiaries when they pass on, but it’s a close call between that and simply making sound investments of the same amount of money, especially if you don’t die that soon. Which would you want to hope for?
Like I said, insurance seems to be a backwards concept. But we live in an increasingly backwards world. Why just today, I got a reminder email about my fantasy football league, a concept where you might actually find yourself rooting against your favorite team or player in order to win. Now that’s backwards!