If you live in a cave, have nothing of value and have no prospect of earning an income to support yourself or your family then I guess there aren\’t any compelling reasons to take out an insurance policy.

Generally this isn\’t the case. Most people in the developed world have possessions that are dear to them, expensive to replace in one lump sum or they give enough thought as to what will happen when they die.

For these reasons people take out either home (including contents) insurance, equipment insurance and or life and medical cover in case of emergencies. Of course some insurance is legally required such as vehicle or public liability insurance to cover events concerning 3rd parties.

The whole basis for insurance is to protect yourself from what can\’t easily be replaced but not for insurance claimants to make a profit from their claim. An example would be in the case of a fire in which a house and all its contents are destroyed.

In this example the right coverage of insurance would be the costs of rebuilding the house, furniture, electrical items, fixtures & fittings are all included. Smoke damaged or otherwise ruined clothing also would be replaced and although things would never be the same, the costs for these items are all borne by the insurance company.

It would not be allowed for the claimant to replace their Wal*Mart clothing by the latest designer wear. This area can often be the subject of conflict balancing real costs against perceived costs. This is often the job of the loss-adjuster to address and try to make things reasonable for both the insurance company & claimant.

Insurance companies take risks on balancing the amount they charge in premiums against the statistical level of claims. They are entitled to reduce claims if they find a claim has been under or over insured. Generally people do not realise the full value of their possessions and the costs involved in replacing them all, even down to salt & pepper pots and light fittings.

Underinsurance is an issue for the insurance companies as they take in less in premiums and so have a harder job balancing their books.

Insurance on lives is another area that people tend to skimp on. No one really believes they will die in the next few minutes or hours but statistically someone will. The problem is, aside from the trauma that causes relatives & friends, what happens next. If the deceased was the main breadwinner how much is needed in insurance coverage to secure financial protection when that person is no longer there to provide an income. Depending on their annual earnings, this sum can be extremely high.

Worse still could be the situation where a person is incapacitated so, combined with a lack of income their long term care has to be provided for. Not so bad in the UK or many countries in Europe but in North America those cost could be astronomical.

There are formulas to work out your required income in these circumstances but anyone looking for insurance has to at some point, like the insurance company itself, take a risk on what may or may not happen. If not your whole income could be spent on insurances with nothing left for living. This itself is sad as, after all, statistically people living in developed countries have never lived so long nor been so healthy.

Author Bio: Keyes insurance in Halifax offers a trustworthy approach to insurance. Advice, help and a thorough understanding of insurance will give you the best insurance cover available for your individual situation. We aim to give best rate possible on coverage for car insurance and home insurance in Halifax Nova Scotia.

Category: Finances
Keywords: insurance, car insurance, home insurance