THINGS THAT RENDER INSURANCE A MAZE
- Partly, it is terminology, concepts and definitions. If your birthday on the 2nd of this last January was the 40th, some insurance companies will take you as 41 years old from July 02, while others will take you as 40 during the whole year, e.g.. If you smoke the cigar or the pipe, for the majority of companies it means that you are a smoker (who pays much higher price for the same insurance protection), while there are a few that treat you as a nonsmoker. With disability insurance, with some policies you qualify for the benefit if you cannot do your regular job, while in another policy you qualify only if you are unable to perform any job you are qualified for by education or practice, … or perhaps only if you are unable to work at all. For the recovery period from sickness, some companies may pay a partial benefit as long as you are under the care of a doctor, while another may pay, even if you are already healthy, as long as your income is reduced because of the sickness (and even your income can be calculated in different ways in the latter case). The line of examples could go on. (For a tragicomic, though not insurance-related story that may drive the importance of using proper terminology home, click here.)
- Beyond the most basic meaning and purpose (that is, providing income to live on in case of misfortune) life insurance can serve several other purposes that perhaps do not even occur to the uninitiated. These other purposes can be, e.g., retirement, educational saving for the kids, wealth transfer between generations with the least possible tax burden, or even business applications, such as keeping a business in existence when someone key to the operation (an owner, a partner, or someone with hardly replaceable skills) dies or gets ill.
- There is an incredible variety of products to chose from; and the prices of even very similar products can vary widely from product to product and company to company.
- Many people think that group insurance, Workers' Compensation Board protection, and various forms of government assistance mean adequate protection. In some cases these opinions are more or less correct; in an increasingly large number of cases, however, some of these sources of protection are not there, or their longevity cannot be expected with strong certainty. And even if someone can get protection from these not individually owned policies, coverage is usually quite narrow. WCB pays only for accidents on the job, or illnesses the cause of which is without doubt the working environment. If someone has group coverage, /s/he can loose it quite easily. And for many people's lifestyle, the possible income from these sources we are discussing is just inadequate.
- Appreciating the mathematics of long term processes is not obvious. This is not rocket-science, still most people just ‘do not feel' what a difference it makes if we calculate with slightly different rates of compounding or inflation, or how much it takes to accumulate a fund large enough to provide a desired level of real income through many years. See a few examples for the importance of the time factor on this site, and perhaps spend time with some of the on-line calculators available from this page, or elsewhere on the web.
- Unsatisfactory knowledge of trends and probabilities in the economy, health, and demography fields. This deficiency cannot be quick-fixed because of the breadth of the field. I put some relevant information into my primer, or you can start collecting such information by visiting one of the Web sources I suggest to you on a separate page.
- Insurance issues are interconnected with taxation, investment, an legal aspects. Because of this, relying solely on an insurance specialist is sometimes not enough, … just like relying on a lawyer, an accountant, or a financial expert alone would not be.
- Nobody's situation is constant, in terms of needs, means, family status, responsibilities, health status, purposes, preferences, or life-style. A change in just one of these may necessitate a review and possible revision of one's risk management strategy and perhaps insurance coverage as well.
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Life and health insurance (including disability, critical illness, and long-term care protection)
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