Are you over insured?
Discussion
Insurance was originally created to help deal with catastrophic risk ie cases where if the “bad” event happened then the person taking the insurance could be bankrupted or financially ruined. A good example would be house insurance where you have a mortgage. Clearly if the house burnt down and became worthless and you still owed the bank for most of its value that could bankrupt you.
However it seems that many of us have insurance for minor risks and sometimes the expected loss is much less than the insurance premium.
Taking one example, I used to work for a bank selling consumer loans and car leases. So many people took the payment insurance but it was almost pure profit for the bank as the rate of claims on the insurance was low (and the actual protection if you read the small print wasn’t great). Similarly if you hire a car they will offer you insurance to cover the excess but the rates are so high it must be mostly profit for the hire companies (which is why they are so keen to sell it to you).
So are you over insured or do you weigh up expected losses against premiums before buying any insurance?
However it seems that many of us have insurance for minor risks and sometimes the expected loss is much less than the insurance premium.
Taking one example, I used to work for a bank selling consumer loans and car leases. So many people took the payment insurance but it was almost pure profit for the bank as the rate of claims on the insurance was low (and the actual protection if you read the small print wasn’t great). Similarly if you hire a car they will offer you insurance to cover the excess but the rates are so high it must be mostly profit for the hire companies (which is why they are so keen to sell it to you).
So are you over insured or do you weigh up expected losses against premiums before buying any insurance?
Skeptisk said:
and sometimes the expected loss is much less than the insurance premium.
Can you give an example of the premium being higher that the risk being covered? Also, for millions of people in this country, a £300 bill for their ill dog or broken washing machine is a catastrophic loss. They haven't got £300.
TwigtheWonderkid said:
Puggit said:
Pet insurance for cats - put the money in to an account every month and pull from that instead.
And when your cat breaks it's leg two weeks after you start to put money into an account? When we travel I only get medical cover now.
We had to claim for theft and after deduction of excess, fair use and depreciation and faffing getting receipts for everything and letters for stuff that was a gift and finally waiting nearly 6 months for the money it really wasn't worth it.
That was apparently 5 start cover too.
We had to claim for theft and after deduction of excess, fair use and depreciation and faffing getting receipts for everything and letters for stuff that was a gift and finally waiting nearly 6 months for the money it really wasn't worth it.
That was apparently 5 start cover too.
Pet insurance is an anomaly, it is just swapping pound notes.
Leaving that to one side, Most individuals with cash reserves and larger businesses do not have the mentality of insure everything down to pond zero but take a few that minor losses are not the purposes of insurance and stand the first part of any claim themselves, minimum of £1000, in return for a significant premium reduction, worked for me over 50 years, my business stands the first £10,000 of any property claim and vehicles are insured on TPFT.
Leaving that to one side, Most individuals with cash reserves and larger businesses do not have the mentality of insure everything down to pond zero but take a few that minor losses are not the purposes of insurance and stand the first part of any claim themselves, minimum of £1000, in return for a significant premium reduction, worked for me over 50 years, my business stands the first £10,000 of any property claim and vehicles are insured on TPFT.
I think I'm paying £113 for home insurance (bricks and mortar, £100k contents, all risks, some high value away from home etc) so I don't think it's a massive amount. Look at the odd house in the UK hit by lightning and a resultant fire to see the devastation. That £113 also includes cover for alternative accommodation - I know of a large 3 bed flat in town that is keep purely for insurance company rentals and probably costs an arm and a leg - empty and then in use for 6-12 months.
I think on the whole I am overinsured. When I go around the rooms, we used to have £2k sofas now replaced by £3-400 thingies. Expensive carpets now replaced by wooden flooring.
I think on the whole I am overinsured. When I go around the rooms, we used to have £2k sofas now replaced by £3-400 thingies. Expensive carpets now replaced by wooden flooring.
CammyN said:
Pet insurance is an anomaly, it is just swapping pound notes.
Leaving that to one side, Most individuals with cash reserves and larger businesses do not have the mentality of insure everything down to pond zero but take a few that minor losses are not the purposes of insurance and stand the first part of any claim themselves, minimum of £1000, in return for a significant premium reduction, worked for me over 50 years, my business stands the first £10,000 of any property claim and vehicles are insured on TPFT.
That sounds like a good idea. One of my old clients had a fleet of 400 vehicles so a fair number of motor accidents. And it was NEVER their fault!!Leaving that to one side, Most individuals with cash reserves and larger businesses do not have the mentality of insure everything down to pond zero but take a few that minor losses are not the purposes of insurance and stand the first part of any claim themselves, minimum of £1000, in return for a significant premium reduction, worked for me over 50 years, my business stands the first £10,000 of any property claim and vehicles are insured on TPFT.
Skeptisk said:
Insurance was originally created to help deal with catastrophic risk ie cases where if the “bad” event happened then the person taking the insurance could be bankrupted or financially ruined. A good example would be house insurance where you have a mortgage. Clearly if the house burnt down and became worthless and you still owed the bank for most of its value that could bankrupt you.
However it seems that many of us have insurance for minor risks and sometimes the expected loss is much less than the insurance premium.
Taking one example, I used to work for a bank selling consumer loans and car leases. So many people took the payment insurance but it was almost pure profit for the bank as the rate of claims on the insurance was low (and the actual protection if you read the small print wasn’t great). Similarly if you hire a car they will offer you insurance to cover the excess but the rates are so high it must be mostly profit for the hire companies (which is why they are so keen to sell it to you).
So are you over insured or do you weigh up expected losses against premiums before buying any insurance?
I'm strongly in the second group - I work for an insurance company. However it seems that many of us have insurance for minor risks and sometimes the expected loss is much less than the insurance premium.
Taking one example, I used to work for a bank selling consumer loans and car leases. So many people took the payment insurance but it was almost pure profit for the bank as the rate of claims on the insurance was low (and the actual protection if you read the small print wasn’t great). Similarly if you hire a car they will offer you insurance to cover the excess but the rates are so high it must be mostly profit for the hire companies (which is why they are so keen to sell it to you).
So are you over insured or do you weigh up expected losses against premiums before buying any insurance?
I have extensive coverage for my house and vehicles, always buy decent travel insurance, and have good life/critical illness cover. For smaller risks though I just put money aside into a savings account. Possible exception is car breakdown service, but that's more about making the process seamless really, it's not just about the money.
There's a reason the PPI scandal was termed a scandal - because it was, as you saw from the inside, all profit with the chances of a successful claim close to nil.
Vet bills can get astronomical very quickly so insurance can definitely pay for itself many times over, but the downside is a lot of policies start excluding things that you have claimed for upon renewal and/or you start getting in to the dance of "the back problem is not related to the leg problem" and all that nonsense.
TwigtheWonderkid said:
Skeptisk said:
and sometimes the expected loss is much less than the insurance premium.
Can you give an example of the premium being higher that the risk being covered? Also, for millions of people in this country, a £300 bill for their ill dog or broken washing machine is a catastrophic loss. They haven't got £300.
Skeptisk said:
I already gave the example of buying extra cover when hiring a car. It can cost £50 for a week to insure £1000 of excess. What is the chance of having an accident in one week of driving? Put another way - would you pay £2500 annually to insure against a risk of just £1000?
Isn't that just a poor value policy?I bought a £10 excess policy that covers £7,000.
Jakg said:
Skeptisk said:
I already gave the example of buying extra cover when hiring a car. It can cost £50 for a week to insure £1000 of excess. What is the chance of having an accident in one week of driving? Put another way - would you pay £2500 annually to insure against a risk of just £1000?
Isn't that just a poor value policy?I bought a £10 excess policy that covers £7,000.
Also, which car hire companies have a £7,000 excess?
Permanent Health Insurance (long term disability) - rarely pays out.
I used to work for a software house that produced software to support Life & Penions administration. I remember being in a meeting with Prudential in their Reading Head Office discussing the possibilty of automating PHI payments to claiments.
As the Prudential staff couldn't reach agreement on exactly how the level of benefit should be calculted I asked them how many PHI claims are you currently paying?
Someone went off to speak to their admin teams, answer, one claim in the entire history of them providing PHI cover.
I used to work for a software house that produced software to support Life & Penions administration. I remember being in a meeting with Prudential in their Reading Head Office discussing the possibilty of automating PHI payments to claiments.
As the Prudential staff couldn't reach agreement on exactly how the level of benefit should be calculted I asked them how many PHI claims are you currently paying?
Someone went off to speak to their admin teams, answer, one claim in the entire history of them providing PHI cover.
lancslad58 said:
Permanent Health Insurance (long term disability) - rarely pays out.
I used to work for a software house that produced software to support Life & Penions administration. I remember being in a meeting with Prudential in their Reading Head Office discussing the possibilty of automating PHI payments to claiments.
As the Prudential staff couldn't reach agreement on exactly how the level of benefit should be calculted I asked them how many PHI claims are you currently paying?
Someone went off to speak to their admin teams, answer, one claim in the entire history of them providing PHI cover.
That may be because the Prudential are not a conventional PHI market.I used to work for a software house that produced software to support Life & Penions administration. I remember being in a meeting with Prudential in their Reading Head Office discussing the possibilty of automating PHI payments to claiments.
As the Prudential staff couldn't reach agreement on exactly how the level of benefit should be calculted I asked them how many PHI claims are you currently paying?
Someone went off to speak to their admin teams, answer, one claim in the entire history of them providing PHI cover.
PHI is no longer a popular type of insurance and this goes back to the days when a higher proportion of people did not reach normal retirement date than those who drew a pension, Unions pushed for Employers to buy the cover, it also avoided the problem for employers of what to do with employees who were on long term sick and unlikely to return to work as it paid a weekly benefit of typically 75% of weekly wage if you were unable to do your USUAL occupation due to a medical issue and payable up to age 65, 66 now of course
insurers could often be very difficult when it came to paying up, especially if the person was young and they could be paying for 40 years.
PHI insurance is now too expensive for most Employers to fund.
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