If you won an all-expenses paid trip to Las Vegas, would you do any gambling while you were there? Yes, no, ...well maybe? When my daughter was 16 or 17 years old (you probably remember that time in your life that you were almost an expert at everything) we took a family vacation to Las Vegas. We walked into Caesar’s Palace and she spotted a sports car on top of a group of slot machines. The car was the grand prize to be awarded to some lucky winner on that group of slot machines. She promptly informed Mom and Dad that SHE was going to be that lucky someone. One roll of quarters and three minutes later she told us, “Gambling sucks.”
Do you consider yourself to be like our daughter and want nothing to do whatsoever with gambling? Are you one of those people who think that you never, ever gamble? Well I hate to tell you this, but the insurance industry and insurance policies are built on a gambling premise.
You will be well served to remember this basic principle: The business of insurance is a bet. Insurance is nothing more than a large company (as is a casino), with a large balance sheet, playing the odds against you...on your health, risk of an accident, storm damage, theft, death or other potentially catastrophic loss. Insurance companies educate themselves in extreme detail on the odds of actually having to pay out money on a claim. From this data, they calculate how much they can charge you based on the possibility that you will file a claim, and they will still be able to make a profit!
When you own any kind of property, whether that property is possessions like furniture, clothing, an automobile or a house, when you purchase an insurance policy you are gambling. You are gambling your money every time you make a monthly premium payment. You are betting the premium amount that you spend that something unfortunate will happen to you.
If you don't lose, you lose your premium money. If you win, the best that you can hope for is to break even by receiving the money that you need for your repairs from your insurance provider. Even then you can’t break even because of a little something known as a deductible. You really can only get to within a deductible of breaking even!
Whether someone wrecks your car, you have a major medical issue, or your house gets damaged, you, the policyholder, have to lose to receive any money from your insurance company. And here's the real kicker! By using those number-crunchers and their sophisticated software programs, insurance companies know in advance just how likely it is that you will file a claim. If they determine that you are more likely to file, they increase the odds in their favor by forcing you to gamble with more of your money, as in charging you a higher premium.
Isn’t It Fun Playing the Insurance Game?
by Mark & Corinne Huey