Why I Hate Insurance


My business recommends services and products created by insurance companies so how dare I say I hate insurance?

Well first let me tell you why I love insurance. In theory, insurance is a beautiful concept. In life, everyone runs the risk of bad things happening to them. By buying insurance, you pool your risk with others. You put money in a kitty so in case you need money for when bad things happen, it will be there, guaranteed. To me insurance also has a nice community sense to it because my money is covering my risk and the risk of others.

That’s Not Fair

Insurance appeals to my sense of fairness – a concept that I developed very early in life in sibling combat with my younger sister. Our battle cries of “That’s not fair” rang out at all times that one of us felt that the other had received preferential treatment. I know, I know . . . life is not fair. But because life is not fair, insurance makes it fair. Well at least it should make things fair.

So why are insurance companies willing to take on the risk of all their policy holders? Well frankly because of the potential of profit and profit – up to a point – seems fair. Why shouldn’t insurance companies pay their claims, cover their expenses, pay their employees, and then have money left over to further grow the business, and to reward employees and sometimes even policy holders?

How is profit generated by insurance companies? First, insurance companies are relying on the odds that not everyone insured will have a claim. Second, they price premiums so that these cover the expected total amount of claims that will be paid plus expenses and a margin for profit and this may include increasing premiums on policies already in force.

They Profit From Investments

Another way to maximize profit is by keeping business expenses down including – yikes – not paying claims! But finally, the insurance company doesn’t keep the money collected from premiums in a safe deposit box. These funds are actively invested to produce income under the very robust regulation of the federal government. In fact, an insurance company may make more money from investment income than it does from premiums.

Complicated And Difficult To Understand

So why do I hate insurance? Insurance is complicated and can be difficult to understand. Different types of insurance work in different ways and not all insurance agents and brokers are specialists in all types. Think twice before buying long term care insurance from the same person that sells you auto insurance, for example.

There are limitations to policies to make things fair for the insurance company; specifically, exclusions. Exclusions can range from pre-existing medical conditions to exclusions for certain situations like losses arising from warfare. It’s not so much that I hate the exclusions – I understand that some exclusions are necessary to keep insurance companies viable. What I hate is when the buyer is unaware of the exclusions or does not understand just how such exclusions may keep benefits from being paid.

Also, as in every industry, not all insurance companies are alike. They are rated by independent agencies as to their financial strength because you don’t want a poorly run company to invest your premiums. But there is also the customer service aspect to consider. How are you treated when it is time to file a claim? A bad company can really make your insurance choice a costly mistake. What’s the good of having an insurance policy for example, if it is impossible to get a claim paid?

Helping Clients Avoid Mistakes

All these reasons that I mention for hating insurance are the same reasons that I became licensed in insurance and started Red Feather Financial. I want to help others avoid the mistakes that I and my family have made when it comes to insurance. For me it’s as simple as making sure that my clients are educated about the pros and cons of any recommendations I make and that I only recommend products from insurance companies that I would purchase for myself and my family in similar circumstances. After all, I’m just trying to keep things fair.

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Investment Advice offered through William Joseph Capital Management, LLC, a Registered Investment Advisory Firm (RIA) registered with the U.S. Securities and Exchange Commission (SEC). Lower fees for comparable services may be available from other sources. Sabrina Scott is an Investment Advisor representative of William Joseph Capital Management, LLC. Red Feather Financial and its representatives provide insurance services separate from William Joseph Capital Management LLC. Red Feather Financial is not affiliated with William Joseph Capital Management LLC.