Where are you on the risk aversion spectrum? Super safe, insuring everything, or cavalier and blasé about your belongings and family? Somewhere in the middle?

It’s a tough one. Some insurances – like car or mortgage protection – you have to get. Others, clearly, you don’t. Some people seem to view insurance as something they’re entitled to get a payout for, after a few years of claim-free premiums. ‘Yes, I could do with a new living room carpet; time to engineer some spillage..’

For those of us who are more honest, however, either you view insurance as a necessary evil or an unnecessary ‘nice to have’. I used to belong fairly and squarely in the former camp. These days, though, I’m not so sure.

Firstly, there’s the financial argument. If you never pay for metered parking, one day you’re going to get caught and your fine might equate to all the fees you should have paid. That’s fair enough, and not really an insurance example, more a general risk and return argument.

I hire a car quite a lot, and I always take out excess insurance, so that I’m properly covered in the event of any incident. I have friend who doesn’t take it out, figuring out that if he does eventually have a prang, then the cost of picking up the tab will be off-set by all the times he never paid for the extra insurance.

The other dimension, though, is the success rate for a real claim. These days the small print seems to exclude almost every eventuality for which you’re taking out insurance in the first place. I have mobile phone insurance, but if I leave it in my car, it’s only covered against theft if it’s in the glove compartment and the compartment is locked. Who does that?

I used to work for a guy who never insured any of his contents. He simply didn’t bother; it wasn’t worth it to him. His reasoning was ‘Who’s going to steal a bed anyway?’ Well, presumably a bunch of organised thieves who know you’re away for a weekend and stage a fake house-moving heist. This chap would simply go ahead and buy replacement stuff if it ever happened. He could afford to.

But the question remains. As insurance companies are often in similar financial straits to lending organisations, and with premiums sky-rocketing, there is a huge incentive to make the claiming process as rigorous and parsimonious as possible. They’ll wriggle out of a payment if they can.

 

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