You might not have thought of it this way, but insurance is a bet. I bet the insurance company £100 that our house won’t fall down and they give me odds of a 1000 to 1. House burns down and they pay up. Obviously it’s a bit more complex than that, the small print. It’s only fair that I don’t deliberately burn the house down, for example.
But this small print is where the insurance companies vary from the honest betting shop.
Imagine the scene, your horse romped home at 10 to 1 two lengths ahead of the field so you head into Ladbrokes with your ticket to claim your prize. “Ah, sorry but we aren’t going to pay up because the sun was in the horse’s eyes as defined in clause 73, subsection 19 b of the betting terms” How long do you think they would be attracting punters.
But this is precisely what insurance companies do all the time. They look for something in the small print to get out of paying. Some friends of ours had there house burnt down. It was arson, but not by them. Their cat and dog died in the fire and it was only luck that their daughter wasn’t there. Still, the insurance company held off pending the police reports, which you can understand.
Of course, we need insurance. The risk of the house burning down is a bet we have to take and when we drive on the road it’s the law, but some insurance just isn’t worth taking. In our post today we’re exhorted to insure against plumbing problems. Apparently, for just £24 a year (against the usual price of £75 a year if we say yes today) we can be covered for the huge bill of fixing our mains pipe if it bursts or repairing a nail through a heating pipe.
So, our bet is £75 to cover an average bill of say £250 if and it’s a big if, something happens. We’ve not had any plumbing done since we moved apart from a new tap so we have saved £325 towards our plumbing fund. Not a good bet to take then.
If you borrow money they try and sell you insurance to cover the loan payments if you are ill or un-employed, often for a limited period as well. The cost is often higher than the loan itself! So not the best of bets there either. And they are notorious for not paying out on those schemes, especially if you have had an illness before. The small print is enough to drive a lawyer to distraction.
Do I need it? What is the risk and what would be the cost? Is it a good bet? And if I do ‘win’ will the bees pay up or just look to get out of their obligations.
That’s it – rant over!