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Smart Money Saves Money

Smart Money Saves Money

Smart Money Saves Money

Too often do people look at insurance and strictly see a waste of money. Utilizing insurance can greatly benefit your life, financially and personally (The biggest example that many of you may have heard of is the ability to borrow loans from your life insurance provider). However, other hidden benefits exist; you just have to look deep enough.

Understanding insurance is understanding risk from all perspectives. Analyzing how people act around daily occurrences and accidents demonstrates unique personal behaviors that insurance companies use to categorize each customer. From the perspective of a seller, knowing that your insurance holder will not consistently crash their motorcycle is a good guarantee. The name of the game is to be risk-free; if the individual is rather riskless, then insurance companies would flock to attract their attention.

On the flip side, the individual looks to present themselves as low-risk as possible. The base cases include hiding previous driving accidents, denying liability, and the usual “it’s hard to say who’s fault it was.” Unfortunately, these risk-lowering strategies do not work ever. What companies instead look for are safety measures you take prior to the accident occurring.

Consider the following situation: Car A, a 1997 sedan without a lick of upgrades, collides with Car B, a 2018 SUV (note: both drivers have clean accident records). From an unbiased 3rd party, which side looks liable: Car A, set with manual gear shifts and an engine blowing black smoke, or Car B, equipped with lane-assist, brake warnings, back-up cameras, auto-pilot, and mirror cameras. Indeed, there exists the very real world where Car B is completely liable and Car A is merely a victim; however, from a probability and risk basis, a company may not wish to take those chances. As a result, the company jacks up Car A’s premiums and maintains Car B’s relatively rate low.

All things considered, this exchange is unfair for Car A’s owner. In fact, Car A may need even more insurance and protection than Car B’s driver. Regardless, one vehicle is more of a risky investment than the other, and that is all the insurance company sees. So how can you promote yourself to these companies as a desirable asset?

The easiest way to demonstrate your riskless nature is to, well, not be risky. A clean record is the best way to lower premiums (this option is pretty obvious). The next best method is to certify yourself with as many protections as possible.

You may be confused. Rightly so. Certified? In what? Let’s use another example. Flo by Moen, a water monitoring service which allows owners to view their home water system remotely through an app, offers a certification – essentially stating that your home is “protected by Flo.” Once you acquire this certification, certain insurance companies (ex. Hanover Insurance) lower premiums, deeming your home to be more protected from water damage. Less worried of a burst pipe ruining an entire floor of material, insurance companies calculate that Flo lowers the estimated risk and can safely offer a discount without losing money.

Unfortunately, Flo is not cheap, but the cost is only a fraction of the value you receive. Depending on the product, insurance companies may contribute to the payment or installation fees. Furthermore, the product itself offers protection. Landscape consultation can prevent dangerous trees from falling on your property. Home warranties can save busted electronics or appliances. Each of these preventive measures can lower your premium (contact your insurance agent to discuss possible discounts).

Thus, the name of the game is risk. Deem yourself as not risky, and companies will flock to your doorstep.