Insurance is something that most people consider extremely boring.  Policies, coverage, riders, exclusions, blah, blah, blah… It is the one thing that we buy that we hope NEVER PAYS US BACK…

We tend to ignore our insurance, until an accident or other event occurs… and then we dive into the small print of our policy with gusto.  And sometimes swear at the things that we thought we covered but aren’t.    

So, there are two factors that determine what the insurance company is going to charge us for a policy—1) what is the amount of the loss we are trying to protect, and 2) what is the probability of the event occurring.

Just as a simple example, you have Homeowners insurance… let’s say your house and contents are worth $400,000 (not including the land which will still be there no matter what).  In a given year, if there is a 0.25% chance of you having a fire or other cataclysmic event that would cost the insurance company that $400,000, then they would charge you about $1000 a year plus their overhead plus a profit for themselves to take this burden.  As long as they made proper guesses about the probability, then they will do well, and the 0.25% of people that suffer the huge damage will be able to recover.  The lucky 99.75% paid their $1200 safe in the knowledge that a disaster wouldn’t ruin them.

Some things are not big enough to worry about insuring against—when you are able to handle the risk yourself and afford the cost of the event, then this is called being self-insured.  Many people with cars that are paid off do not insure their cars against collision (relatively small bucks), but only against the liability claims of someone who might be injured (could be big bucks if death or serious injury occurs)…

In business there are a number of key insurance areas that need to be looked into…

• Automobile Liability
• Home Office
• Business Interruption
• Professional Liability
• And many others…

If you have an Insurance Agent, they are a vital part of your team and you need to schedule a time to review your coverages.  Another new concept is what is called a Business Insurance consultant, and these professionals will review all your risk areas, and help you get the right coverages without any bias towards particular insurance companies.  This is a great way to proceed if you don’t already have coverage. 

Having the proper insurance in place so that the “Black Swan Event” doesn’t cost you everything is a vital asset protection strategy…

Have a safe and well-insured day!

Rob

Insurance is something that most people consider extremely boring.  Policies, coverage, riders, exclusions, blah, blah, blah…

Until an accident or other event occurs…

and then we dive into the small print of our policy with gusto.    

First off, what is insurance?  In the big picture, we are trying to protect ourselves from a reasonably low-probability event that we could not easily handle on our own financially.  We make a payment to the insurance company, and so do many other people, and the ones that have the unfortunate event happen get reimbursed for all or part of their loss.  So, there are two factors that determine what the insurance company is going to charge us—1) what is the amount of the loss we are trying to protect, and 2) what is the probability of the event occurring.

Just as a simple example, you have Homeowners insurance… let’s say your house and contents are worth $400,000 (not including the land which will still be there no matter what).  In a given year, if there is a 0.25% chance of you having a fire or other cataclysmic event that would cost the insurance company that $400,000, then they would charge you about $1000 a year plus their overhead plus a profit for themselves to take this burden.  As long as they made proper guesses about the probability, then they will do well, and the 0.25% of people that suffer the huge damage will be able to recover.  The lucky 99.75% paid their $1200 safe in the knowledge that a disaster wouldn’t ruin them.

Some things are not big enough to worry about insuring against—when you are able to handle the risk yourself and afford the cost of the event, then this is called being self-insured.  Many people with cars that are paid off do not insure their cars against collision (relatively small bucks), but only against the liability claims of someone who might be injured (could be big bucks if death or serious injury occurs)…

In business there are a number of key insurance areas that need to be looked into…

• Automobile Liability
• Home Office
• Business Interruption
• Professional Liability
• And many others…

If you have an Insurance Agent, they are a vital part of your team and you need to schedule a time to review your coverages.  Another new concept is what is called a Business Insurance consultant, and these professionals will review all your risk areas, and help you get the right coverages without any bias towards particular insurance companies.  This is a great way to proceed if you don’t already have coverage.  I would recommend you to contact Sunny Carlson to discuss your needs.

Also, one of the Bonuses in my Corporate Records system is an awesome report on Insurance called the Business Insurance Blueprint, and it also includes two audio conversations between Sunny and myself on the topic of Business Insurance….  I highly recommend this program…

Thanks for reading, and see you tomorrow!

PS: I thought about doing “I” is for Income and decided to do Insurance instead. Here is the twenty five cent version of Income… It is easier to improve your situation in life by increasing the ways you make Income than by reducing Expenses.  Of course you don’t want to waste money, but money spent wisely in the pursuit of more income is a good investment… How can you find new streams of Income?  How can you increase your income from your present streams?  Are you investing money in things that will return you more Income?

While you are preparing for the Holidays and planning for the future…here’s something to add to your “grocery list”…

If you are married or in a long term relationship with joint finances, then the person who handles the finances for the household should take the time, while they are healthy and able, to write out a simple list of all bank accounts and retirement accounts that you have with the names of the institutions and the account numbers.  

Also,  a list of all insurance policies.

Put the page in a place that is obvious and tell your loved one that it is there, and maybe at the same time give them a ten minute description of the filing system, (video tape this if you want).

Every year  update the list or keep it updated through the year. (I do it between Christmas and New Years)

God Forbid, if anything happens to you, then at least your family will have some clarity on these issues as they deal with other issues.  And that is a gift that you can give them in a few minutes if you plan ahead of time.

And, get a Will as well following the information provided by the Do It Yourself Lawyer…

Seize the Day,

Rob Northrup

Is Your Corporation Protecting You?