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The real cost of saying ‘No’

I sell a product that most of my clients won’t use. Every day I take money from people in exchange for a promise from me and the companies I represent – a promise of restoration – basically that if you experience a financial setback under certain circumstances you will be restored to the financial position you were in before that disaster occurred (stick with me here, it gets more interesting).

The majority of people who turn their hard-earned money over to me in exchange for this promise never experience such a loss. Think about that. They pay but get no material object or physical property in return. So, when people pay for years and years and seemingly get nothing for it, some become embittered about the insurance transaction and the industry in general, and begin complaining about how much they’re paying.

I completely understand this by the way. I mean, I’d rather pay $100 for something I’m not going to use rather than $200, if I’m forced to buy it at all.

So what happens? People search out the cheapest coverage they can find. The decision to buy becomes based solely on whose price is the lowest. Often, the differences only become evident when it comes time to make a claim. Have you ever had to make a home insurance claim? Ever had your home damaged and discovered you did not have sufficient coverage?

Imagine for a second this scenario – your sewer backs up and there’s three inches of black water in your recently re-finished basement. You submit a claim only to find out that you’re not covered for this because you opted to save the $10 premium.

Or, let’s go future-tense here – The Big One is coming, we all know it. You decide that $40 per year is too much to pay for earthquake coverage for your condo or tenants package. Guess what happens when there’s a 7.0 nearby and your house starts rocking? All those broken dishes, toppled LCD and Plasma TV screens, smashed bookcases – none of it will be covered by your insurance policy.

If you’re a home owner and see cracks in the walls and ceilings, broken pipes etc., you’ll be concerned with the possibility of structural damage to your home. Again, if no earthquake coverage was paid for there will be no money from the insurance company to pay for these repairs. (Earthquake coverage for homeowner policies does cost more, depending on home values).

Bottom line (though it’s a tired cliché), you get what you pay for. That doesn’t mean you need to get the most expensive policy you can find either. You just need to make sure you know where the gaps in your coverage are and consider the effects of declining the coverages that would fill those gaps. (My Dad used to remind me all the time that you can choose your actions, but you can’t choose the consequences of those actions – discuss).

So. Now what?

You’re not an ‘Insurance Professional’ and may not know where to start or who to trust. Maybe you’ve put off the idea of home insurance because you think insurance companies just want your money and never actually pay out claims.

Or maybe you’re like I was before I ever bought a policy of my own – I found the whole application process overwhelming so I kept procrastinating, congratulating myself at the end of every month that went by and I’d kept that premium in my pocket. Each day that passed without disaster occurring enabled that once-pressing need for insurance to quietly fade into the background…

That works for a while – until your best friend’s mom loses her house in a fire. Or you hear a story about a relative who didn’t have insurance and had their dishwasher flood their kitchen and damage the neighbour’s place downstairs. The majority of first-time applicants that I see are either those who are buying their first condo, or individuals who’ve heard too-close-to-home stories of financial hardship caused when someone they love didn’t have adequate insurance. All of a sudden it becomes much easier to visualize ourselves in the same predicament.

Once you’ve made the decision to get started, don’t just walk into an insurance agency and HOPE the person behind the counter knows what they’re doing. I can tell you this sad-but-true fact: not all insurance agents are capable of correctly issuing a home insurance policy.

Find someone with a demonstrated ability to ask the right questions, explain the coverage in a manner you understand, provide the right information and arrange the proper coverage. You want to leave their office feeling like, “Wow, that person really knows what they’re doing – that was a great experience.”

How do you find that individual? Talk to your friends and do some research. Ask people you trust about their experiences, read up on the industry and do some homework. Don’t give up because it seems like too much work – it’s too important a subject to ignore. Losses like this do happen every day, and you can’t arrange for insurance after you experience a loss.

If you’re ready to begin having this conversation now, contact me at dfeswick@londondrugs.com for an explanation of our process, and to find out how much it might cost to insure your home.

Written by Derek F
Insurance Services Manager, New Westminster London Drugs