IS YOUR LIFE INSURANCE LIKE A SHOVEL, SNOWBLOWER OR SNOWPLOW?

Toronto just experienced the biggest snowstorm since 2008 (Toronto Star). Let’s say a foot of snow fell (30 cm), though drifting made the piles higher.

We can’t accurately predict storms in advance. When the snow falls — and fall it will — how do you clean up the mess?

You have several choices:

• shovel: like term life insurance
• snowblower: like universal life insurance
• snowplow: like whole life insurance

Shovel

A shovel (like term life insurance) is very economical and doesn’t take much space. You get exercise in the crisp, cold air. A shovel is fine as long as the snowfall is light, you’re in good physical condition and you don’t need to get out of the driveway in a hurry.

Otherwise, you may not be adequately prepared. The snow at the end of the driveway isn’t much fun to clear.

Depending on your budget, a shovel may be all you can justify.

Snowblower

A snowblower (like universal life insurance) puts you in charge. The purchase price buys lots of shovels but you get peace of mind. There are ongoing costs for fuel and maintenance.

A well-equipped, well-maintained snowblower has the power and capacity to deliver the results quickly.

SnowPlow

A snow plowing company (like whole life insurance) takes the work away from you … for a price. You normally pre-pay for the season. If you’re a tenant or live in a condo, you likely depend on snow plowing too.

This solution seems ideal. The problem: you’re dependent on an outside party, like Homer Simpson’s Mr. Plow. Everyone wants a clean driveway before they leave for work and before they return home. Despite best efforts, that may not be possible (unless Santa introduces snowplowing).

With whole life insurance, you depend on the insurer to invest wisely and and keep costs low, which translates to premium refunds (called “policy dividends”). You have no voice.

Pearson International Airport has the highest landing fees in the world (atrsworld.org, Jun 2012, PDF). The plowing and deicing is done for the airlines but ...

Just when it was most needed, the de-icing equipment at Pearson malfunctioned Friday. Instead of 30 aircraft being de-iced each hour, only eight could go through the de-icing process, which led to a snowballing effect that progressively worsened. — Toronto Star (Feb 9, 2013)

You don’t always get value for your money.

Too Much?

You can’t tell if you’re w ell-protected against snow until the season ends. Just because you were fine this year doesn’t ensure you’ll be as lucky next year. Insurance can also seem like a waste … until you have a claim. Spending a large sum doesn’t ensure you’re well-protected either.

When To Buy

You’ll save money on shovels and snowblowers after the season --- if anything’s left. With insurance, the products remain in stock and there are no clearance sales. After all, you’re buying a promise that gets printed when you’re ready. Waiting doesn’t save you money. Since you’re getting older, the price keeps going up — if you still qualify for coverage.

When's the best time to buy? Just before the storm … if you can predict accurately and find stock. Since others have the same idea, there may be shortages. The same pattern repeats when there's a blackout. We know we need basics like food, water, batteries and fuel. That doesn’t mean that we have them at hand. You can’t get insurance the moment you decide. The approval process often takes weeks or months. You must prepare in advance.

This Storm

Due to the storm, I used our snowblower for the first time in two seasons. Last year I felt foolish having it. This year too. After all, it's February. Most of winter is over.

I used our snowblower twice yesterday and once today. It started because of ongoing maintenance. It had the power to finish the job without stalling. Most of all, the snowblower provided peace of mind. It’s well worth the cost, though I might not have felt that way the day before or now that the storm has passed. How fickle. How human.

Just as no man is an island, a clean driveway is useless unless the streets are plowed too. As I was finishing on storm day, two city plows cleared our street. The government matters too. The cleanup is costing about $4 million.
Snow melts. If you have time, you can wait. With insurance, waiting doesn’t help you.

Links

• Storm cleanup continues as more messy weather expected (cp24.com, Feb 9, 2013)
• How valid are TV weather forecasts? (Freakonomics, Apr 2008)
• Key findings of global airport performance: 2011, 2012 (atrsworld.org) (PDF)
• The best and worst times to cancel your life insurance
• Does Warren Buffett ‘buy term and invest the difference’?
• The overlooked advantages of universal life insurance
• How to afford the insurance you need
• The perils of whole life insurance

Podcast 206

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PS How to you clear your snow?