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Would You Buy a Flat Screen Television That Doesn’t Work?

July 26, 2010

Chris Garlasco, Owner & Managing Partner - Founders Insurance Group

How about an expensive computer that looks nice in the den, but doesn’t actually turn on? Would you buy a new lawn tractor that rides nicely but doesn’t actually cut your lawn or that bedroom set that you always dreamed of, but has no mattress?

What do all of these things have in common you ask? They are all about the same cost as various insurance policies. In many cases insurance policies can cost more than any of the aforementioned items. I think that it’s safe to say that most of us wouldn’t spend their hard earned money on any of those items. Yet, in the world of insurance, policyholders do it all the time, especially in a difficult economy.

Over the years I have been puzzled as to why consumers make these poor insurance buying choices. I have come to the conclusion that it comes down to a couple of reasons. The first reason is what I like to refer to as the “other guy” syndrome. The “other guy” syndrome goes like this: “I buy insurance because I have to satisfy my state’s motor vehicle laws or my bank’s mortgage requirement, but the “big loss” will happen to someone else. Sadly we take claims every day for “the other guy.” Everyyear, right here in our small business, we see losses that would have brought about personal financial ruin or hardship had it not been for their insurance policy. These losses are not as unlikely as winning the lottery.

The second reason is that insurance is nothing more than a promise. It’s intangible. Unlike that lawn tractor or that expensive bed, there is nothing to touch, feel or sit on. The policy is also filled with legal ease so it can be an easy target for mistrust.

So since we see this challenge arise often with consumers, why this blog today? The reason is a simple one. This morning I witnessed a client reduce homeowner coverage by 50% with a competitor in an effort to reduce costs. In my frustration, I wanted to say that he would be better off taking the money and donating it to charity as it will have a greater impact than if he has to rely on something that wasn’t going to work if he needed it. Spending $1,000 on something that will work well when called upon verses $500 that is nearly as useless as buying that lawn tractor that doesn’t actually cut the grass is always a good choice!

Over the course of our lifetime, the majority of us will experience the need to place some sort of a claim. Whether it be an auto, home, business or medical claim, we can only hope to not be “the other guy!”

Have a great day!

Chris Garlasco

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