WHAT IF INSURANCE WERE FREE?

If insurance were free (and there were no catches), how much would you get?

You might

• top up your current coverage (e.g., more life insurance)
• protect against risks you’ve neglected (e.g., critical illness insurance)
• explore types you don’t know much about (e.g., long-term care insurance)

You might be willing to go through the hassle of the buying process. You might encourage your family and friends to follow your path.

Maybe you wouldn’t do anything what’s free (e.g., air) doesn’t seem to be worth much.

Sale Prices

If insurance were on sale, how much would you get? Your answer might depend on the size of the discount. If large enough, you might even buy protection you’ve refused in the past.

What if there were a one day sale? Would you buy then? Insurers avoid discounts because insurance isn’t an impulse purchase. Instead, they tend to have competitive “every-day” pricing. That’s to encourage advisors to consider their products. They may have contests to motivate advisors but you’re unlikely to know.

You don’t gain by waiting to buy. Even if your health and gender don’t change, you’re getting older. Your age affects the price you pay. Also, newer products don’t mean better guarantees.

Reducing The Price

You can’t save money by buying half an iPhone.  You can save on insurance by buying less coverage. Granted, you get less protection but is no coverage better? Since insurance requires ongoing maintenance, you can re-evaluate your situation during a future inspection.

Insurance costs more as you age and even more if your health deteriorates. You reduce the future price by acting today. When the asset being protected is a human life, the premiums can often be guaranteed for life.

The Limits

A billionaire bought a record $201 million of life insurance, which required 19 insurers and an annual premium in the millions of dollars. Why not more? There are limits on how much insurance you can get even if you can pay.

Underwriters determine what you’re worth. Let’s say that’s $5,000,000. You’ll have trouble replacing more than that. If you try to buy $2,000,000 from five companies, don’t count on getting $10,000,000 of protection. That’s because each company will ask about your other insurance you already have and are in the process of getting.

Real Life

Insurance isn’t free. There’s no Boxing Day, Black Friday or Cyber Monday sale either. Insurance may look like a luxury or waste until you need it. Unfortunately, you can’t buy insurance at moment before misfortune strikes --- at any price.

Links

• Why you can’t (and don’t) buy on price
• Price matching by buyers and price mismatching by seller
• How to get a better price: the Future Shop case study
• Chocolate, price-fixing and salmonella poisoning
• Buying a car vs buying life insurance
• A challenge for Financial Literacy Month (#FLM2014)
• image courtesy of NearlyG

PS It’s currently Financial Literacy Month. Follow #FLM2014 on Twitter.

A CHALLENGE FOR FINANCIAL LITERACY MONTH (#FLM2014)

November is Financial Literacy Month in Canada. Getting attention during the busy period between Halloween, Black Friday, Boxing Day and New Years Day isn’t easy. According to Google Trends, interest in financial literacy has been growing. That’s great news. Kudos to everyone helping create awareness.
There’s more to do.

The Challenge: Current Creators

If you already create ongoing financial education, Thanks! Why not try something new:

• change your format: you likely prefer text, audio, video or photos. Try a different one.
• go live: e.g., hold a Hangout On Air, speak at an event or have a Twitter chat
• adjust your frequency: create more content or cut back to make time for something new
• alter the length: you could make your content longer or shorter
• experiment with a different platform: are you using the LinkedIn Publishing Platform or Pinterest?

You might reach a new audience and feel more enthused to create more content. 

The Challenge: The Silent Million

According to Statistics Canada, 1,122,300 people worked in finance, insurance, real estate and leasing in 2013. That’s 6.3% of the workforce (1 out of 16 people). How many of them publish their own original content to help the public understand money better? Now’s an ideal time.

If a mere 2.7% published a single article during Financial Literacy Month, we’d have 30,000 new articles --- 1,000 a day. And 100,000 articles only requires 8.9% to volunteer for a worthy cause which their employers likely support.

Others know about money too. For instance, accountants, entrepreneurs, executives, lawyers, professors, retirees and teachers. Include them and 1,000 pieces of fresh content a day looks even more feasible.

If each creator promotes to their connections, imagine how many new people could be reached and helped. 

Case Study

I’ve been looking for ways to engage people who aren’t especially interested in learning more about money.

For last year’s Financial Literacy Month, I organized Money 50/50: Insider Advice For Today’s Topsy-Turvy Times at the University of Toronto (like TEDx plus Q&A).  November got postponed to February and the Ted Rogers School of Management (see recap). Since TEDx Talks become videos, I decided to skip a live event and interview these insiders who might have been speakers:

1. How much money do you need before getting financial advice? (Joe Barbieri)
2. Financial independence at 31 (Sean Cooper)
3. The Capital Gains Exemption isn’t a gimme (Mark Goodfield)
4. Insights from an advisor to the insurance industry (Ross Morton)
5. Reaching the unreachable (Jonathan Chevreau)
6. Investing outside the markets (Vikram Rajgopalan)
7. Five essentials to being a better investor (David Toyne)
8. Planning for aging (Gary Hepworth)
9. Demystifying SR&ED (Julie Bond)
10. Retirement planning for small business owners and professionals (Clark Steffy)

This month, I’m

• guiding Grade 8 students through the Economics For Success via Junior Achievement
• sharing Business Strategies For Taxing Times at the Toronto Regional Board of Trade
• launching a series of short educational videos called QanA (Question an Actuary)

Thanks to past, current and future creators of money-related content. Thanks also to everyone who invests in learning.

Links

• Three reasons financial literacy eludes us
• The A-B-Cs of 1-2-3: the key to financial literacy / numeracy
• Do your advisors help with your financial literacy?
• How to screen your sources for financial literacy education (#FLM2013)
• Forget your financial literacy: check your pizza literacy
• Why don’t financial educators have a larger audience?
• Jim Flaherty on the economy and financial literacy (2009)

PS Money matters every month