What is the value of insurance coverage?
Insurance can be a very tricky issue for many people. Coverage of any kind is often considered to be an extra expense that is difficult to justify. For some, the cost of insurance is not worth the protection it offers, while others consider insurance coverage to be mandatory even if it is expensive. The value of insurance coverage varies from person to person as much as it does from one type of coverage to another. Because there are many forms of insurance available, the benefits that coverage offers can typically be shrouded in a layer of confusion that can distort the actual value of insurance.
There are many types of insurance coverage that offer myriad forms of protection. Pet insurance, for instance, helps offset the financial impact of medical care for animals. Flood insurance is meant to mitigate the financial damage associated with certain natural disasters. Regardless of what form of insurance you are interested in, all coverage is designed to provide a financial safety net that can protect you in the event of a disaster, natural or otherwise. The very nature of disaster, however, does lead many to question the actual value of insurance coverage.
Disaster is impossible to foresee
Disasters are unpredictable, even for the insurance companies that pour funds into disaster analysis and forecasting. This means that a person could go their entire life without experiencing a major disaster, such as a hurricane or earthquake. This person may also live a long life free from any serious illness or prominent injury. For the fortunate few that lead such auspicious lives, insurance can often been seen as little more than a money-making scam. Because these people, as hypothetical as they may be, never experience significant disasters, they are never forced to rely on the windfall offered by insurance coverage. Insurance typically only kicks in once you have fallen victim to disaster, which makes it easy for those that pay monthly premiums yet never use their coverage to consider insurance companies to be guilty of foul play.
Insurance companies are, of course, for-profit entities. They are, however, subject to a wide range of regulations that are meant to govern the way they do business. At times, these regulations are not enough to ensure the honesty of insurers, but the regulatory landscape is ever-changing, making way for more consumer-friendly regulations on a seemingly daily basis. While insurers do make profit, they also use the money they collect from premiums to bolster their cash reserves, which are tapped through claims in the event of a disaster or medical emergency. This money is used to cover the cost of medical care and home repairs, as well as a gamut of other expenses that are related to unforeseeable catastrophes.
Value vs. Cost
Health insurance is, perhaps, one of the best areas to focus on when considering the value of insurance coverage. Health insurance provides a safety net for those that fall ill or suffer grievous injury. For these people, insurance coverage helps them avoid costly medical care, which can easily surpass hundreds of thousands of dollars depending on the care being provided. Insurers do, however, limit the benefits they offer through their health care policies. Alot of insurers typically limit their coverage to a specific network of health care providers, meaning that only physicians that are part of the insurer’s network are covered by the policies these companies offer. These measures are in place to mitigate the financial liability that these companies face, but are often criticized by consumers who consider them to be unwarranted restrictions.
Determining whether insurance coverage is worth its costs is a difficult task. It may be best to consider whether you are able to bear the cost of disaster on your own. Though you may never experience a disaster that would justify the value of insurance coverage, betting against disaster can be a costly gamble. Insurance coverage can manipulate that gamble so that the odds are in your favor.