For most people, insurance is their leaky roof. When it’s sunny, everything’s fine. When it rains, it’s too late to fix it. An insurance agent, therefore, is like a roofer, building shelter for clients by providing coverage that protects against storms that could not be weathered alone. But in insurance, as in homes, there are many ways to build or fix that roof. Plain shingles, or fancy wooden ones; old coverage ripped off, or simply covered over and improved. Warranted for a few years or guaranteed for a lifetime. The quality of the craftsman will go a long way to determining how happy you are when the repairs are done.
Enter the insurance agent, your financial roofer. The basic premise behind insurance is simple: Protect those things you cannot afford to replace yourself and cover yourself for outcomes you could not otherwise afford to pay for. That means, for example, that you might want insurance to replace a new luxury car, but might not carry collision coverage on an old clunker. If the former gets smashed up, you don’t have the $30,000 to $50,000 to buy a new one, while if your old beater is in an accident, you can probably replace it for the same money you were paying in annual premiums. In financial circles, the saying is that insurance is always sold and never bought, meaning that no one purchases protection unless required to or compelled by a convincing pitch. No one wakes up and says, “I need to go to the grocery store today, drop off the dry cleaning, and then go buy a universal whole life policy.” That kind of thinking applies to most forms of insurance; you may know you need it, but you’re not getting it without some pushing and prodding. Face it, no one wants to face up to his or her own mortality, the potential to spend a long stretch of time in a nursing home or hospice, the potential to be involved in accidents, the loss of home or property, the loss of income from disability or death, and more. Moreover, no one wants to spend today’s hard-earned money to protect against something that may never happen; after all, the best insurance policies are the ones that allow you to feel safe at night, but that are never cashed because you never have the crisis. The other reason why insurance products are sold versus bought is that they can involve complex jargon and illustrations. The combination of stomach-churning topics with mind-numbing specifics is a real turn-off. And so, people put it off, enjoying the sunshine and promising to fix their financial roof before it rains. Sadly, they can then fall victim to the very sales process that makes them uncomfortable, delaying purchases until the day they meet an agent at a party or receive a cold call after they did a Google search and visited an insurance website. They take the chance encounter as a sign that it’s time to get protection, and the agent with the fortunate timing becomes the lucky advisor with a client ready to fall for the whole sales pitch. The best way to avoid that problem is to tackle insurance head-on, hiring an agent early and working with him or her to develop, upgrade, and maintain a program of financial protection that will always keep the roof protecting the family, without leaks.
If you have no insurance, you are doing this yourself. You are “self-insured,” meaning that if something happens to you tomorrow, you’re liable for all costs associated with the problem. The bigger the issue, the bigger your problem; if you suffer a major disability for which you have no coverage, you’ll find out quickly how inadequate your resources are. If you want insurance, but not an agent, you are looking at the low-load insurance market, where insurers sell directly to the public or work through a quote service like Insure.com or Insweb.com. The sites will do some quick comparison shopping and give you an idea of what’s available and at what cost; while pricing is good, the best deals may require you to meet with an underwriter who does a basic check of your physical condition. If you can understand the terms and conditions in the policies you are being offered, you don’t need to hire an advisor. If, however, you’re going for cheap and easy and you are kidding yourself about your real knowledge of what is in the policy, then you are building your roof from straw and hoping the winds won’t just blow it off.