On Insurance, Risk, and the Fragility of Being

@Al3x Lee

1) A promise
2) The Latter
3) A product of Fear
4) Protect and Extract
5) The owner- In that I mean, the Bank
6) A blanket
7) Cold
8) When I am covered from cold, I am covered for Life
9) Until I am not cold
10) Restoration is a pipe dream man, replacement is the next best option.
11) Because the algorithm says so.
12) Time tolls for you! And me! And my car! My TV! And my house! It will all be dust one day.
13) Its all a spectrum of thought
14) Fate
15) Law of large numbers
16) Reality
17) Barely bearable
18) Two sides of a coin
19) You do
20) No
21) Yes
22) No
23) The community
24) $450 an hour - the price of a lawyer
25) Nothing
26) Nothing
27) Protect us from chaos, not eliminate it.

Me after answering these questions:
 

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@Al3x Lee

1) What is insurance, really? A promise
2) Is it a safety net, or is it a wager against disaster? The Latter
3) Is it a prudent hedge against the unknown, or is it an admission of fear? A product of Fear
4) Is it a system designed to protect us, or is it a way to extract wealth from uncertainty? Protect and Extract
5) Who decides what is worth insuring and what isn't? The owner- In that I mean, the Bank
6) What does it mean to be "covered"? A blanket
7) Covered from what? Cold
8) Covered for how much? When I am covered from cold, I am covered for Life
9) Covered until when? Until I am not cold
10) If insurance is meant to restore, why does it sometimes replace? Restoration is a pipe dream man, replacement is the next best option.
11) If things lose value over time, why does insurance sometimes pretend they don't? Because the algorithm says so.
12) If a car, a home, or a business is worth one thing today and less tomorrow, why does insurance sometimes compensate as if time stood still? Time tolls for you! And me! And my car! My TV! And my house! It will all be dust one day.
13) Why do we insure against the probable, the improbable, and the inevitable, all at once? Its all a spectrum of thought
14) Is insurance an act of responsibility, or is it a bet against fate? Fate
15) Is it a communal pooling of risk, or is it an elaborate game where only a few ever truly win? Law of large numbers
16) Does insurance acknowledge reality, or does it distort it? Reality
17) Does it make loss bearable, or does it make it profitable? Barely bearable
18) Does it encourage caution, or does it incentivize recklessness? Two sides of a coin
19) If insurance is based on risk, then who truly carries that risk? You do
20) The insured? No
21) The insurer? Yes
22) The system itself? No
23) And if that system falters, who pays the price? The community
24) What is the true cost of security? $450 an hour - the price of a lawyer
25) What is the cost of uncertainty? Nothing
26) What is the cost of believing in a safety net that may or may not be there when it's needed most? Nothing
27) And perhaps the biggest question of all: if insurance is supposed to protect us from chaos, then why does it so often seem to create more of it? Protect us from chaos, not eliminate it.
I'm truly impressed. I had to put the questions before your answers so everyone knows what you're answering. This is why we called upon Shawn the Great Philosopher. One day they will carve a statue of this photo you've bestowed upon us.. looks much like the ancient philosophers of old!

The vans are a perfect touch as well. Just what I'd expect a great Philosopher to wear

images.jpg
 
Insurance. What is insurance, really? Is it a safety net, or is it a wager against disaster? Is it a prudent hedge against the unknown, or is it an admission of fear? Is it a system designed to protect us, or is it a way to extract wealth from uncertainty?

Who decides what is worth insuring and what isn't? What does it mean to be "covered"? Covered from what? Covered for how much? Covered until when?

If insurance is meant to restore, why does it sometimes replace? If things lose value over time, why does insurance sometimes pretend they don't? If a car, a home, or a business is worth one thing today and less tomorrow, why does insurance sometimes compensate as if time stood still?

Why do we insure against the probable, the improbable, and the inevitable, all at once? Is insurance an act of responsibility, or is it a bet against fate? Is it a communal pooling of risk, or is it an elaborate game where only a few ever truly win?

Does insurance acknowledge reality, or does it distort it? Does it make loss bearable, or does it make it profitable? Does it encourage caution, or does it incentivize recklessness?

If insurance is based on risk, then who truly carries that risk? The insured? The insurer? The system itself? And if that system falters, who pays the price?

What is the true cost of security? What is the cost of uncertainty? What is the cost of believing in a safety net that may or may not be there when it's needed most?

And perhaps the biggest question of all: if insurance is supposed to protect us from chaos, then why does it so often seem to create more of it?

Any type of insurance, is about risk and risk management. View the deductible as self-insurance, absorbing, taking on that amount of risk. You take on the risk you feel you can afford, that won't negatively impact you, bearable, tolerable, palatable, or even more, decimate you. Then, you transfer the remainder of that risk to an insurance company. Risk management is not a concept. It is a methodology, a process, a science. Sure, there are many variables.

That said, many people view life insurance as a necessary evil, simply a product one has to have. Whether term or a permanent type. Thus, they view it as medicine -- they want to take as little as possible, for the shortest period of time possible, and they want it as cheap as possible. OK, we get that. All of us know the difference between the two types. If term, sure, there is prudent, financials, etc., and other parameters and decisions. We get that too. Same with a permanent type. However, at the end of the day, I often say IF you are only talking about protection, death benefit, the question is "How much?"

If you add the complexion of life insurance being a tool, a vehicle, a financial asset, an asset class, etc., and you are talking a permanent type, then the next question is "What type?"

The insured, or the client, decides what to insurance and how much. Or do they? Doesn't a bank decide that as well when they give a mortgage? Doesn't a company decide that with key-man coverage? Doesn't a buyer of a company decide that when they demand life insurance on the CEO, or a key executive?

As to your other questions, insurance is about risk management, and also indemnification. To indemnify, to make whole. So you insure for current, today's market value replacement. If you can. If the insurance company permits it. I think this comes more into play in the property/casualty world, specifically with homeowners, personal property, replacement, auto, replancement, and collectibles. I had a collector car. I paid $75,000 for the car. The car went up in value, consistently, I kept getting appraisals (which the insurance company required to increase the coverage), and increased the coverage. The car was totaled in a fire. When my consultant and I found the replacement we wanted, the insurance company paid for their own inspection, appraisal, etc., and in the end, they paid close to $200,000 for the car. Plus, they paid to transport it, covered, inside, professionally, over 3000 miles! What if I had been foolish and kept the coverage at $75,000? What if my personal property in my home did not have current, today's cost, replacement value when I had my fire? My couch cost me $15,000 about 15 years ago. To replace it today is over $30,000. Would they pay me $15,000? Would they pay me less for depreciation? Should I buy a used couch? LOL.

Unfortunately, most people have a misguided, misunderstood, uneducated, and improper understanding and view on insurance. In the end, properly designed and structured, insurance can be what you use it -- and pay for it -- for.
 
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