Decidedly not. But the other week I met someone who likened buying insurance to putting money down on a game of chance. Risk, according to him, was just the odds we’re running that something bad will happen. You’re betting against the insurance company.

I was not convinced.

In his world, you put money in and play those odds, making a bet whether a disaster might happen. If you’re a gambling sort and can stomach the risk, you can skip insurance altogether, leaving it all to chance.

But gambling is meant to be fun, isn’t it? The way he was describing insurance, it sure didn’t sound that way. He looked at it as a game that you’re forced to play, a game that separates you from your money against your wishes, a game where you always lose. You find yourself betting against the house (in this case, the insurance company), and we all know that the house always wins. Sigh.

Something’s off kilter here. If you talk to someone who manages risk for a living, whether for a government or a company, their outlook is completely different. Life comes with risks, and each of these needs to be identified and planned for. Protect the things that are important, and you’re sweet.

Insurance is just one way to do that. By pooling together the risk of, say, leaving our children stranded with no money if we die, we are able to cover that risk through life insurance. We can do that in other ways, too – such as through our whānau, or by self-insuring through our own finances – but the risk still needs handling. It doesn’t go away just because we brave the odds. So this has nothing to do with whether we’re a gambler or not. We may be the wildest player there is and love the long shots with the horses, but if we have children, or anything important to us for that matter, we need to manage the risk that something will happen to us or them.

Right. So that said, next step is to make sure we’re not paying too much to cover our risks. Once we’re covered, our money needs to move on and grow in a wealth of other ways.

Top tips to save on insurance

1. Check out all the options to reduce premiums. These include choosing a higher excess, a longer waiting period, a shorter policy term, or even a specific exclusion that makes it cheaper.

2. Shop around. We might immediately think of the usual insurers or banks, but there are also sites like lifedirect.co.nz to help compare policies.

3. Skip the bells and whistles. Some insurers may offer simpler products that are cheaper, yet are still enough to protect what’s most important.

4. Buy only what’s needed. Not everyone needs every type of insurance. A qualified insurance adviser can help examine our risks and priorities and offer solutions to match.

5. Self-insure. If we have significant savings, a family inheritance or other windfall, we may opt out of buying insurance and put away those funds to protect ourselves or our assets..

6. Look after yourself and stay healthy. The premiums we pay for life insurance policies are based on our past and present health.

7. Understand the value. Cutting costs is important, but it’s not all about premiums and price. What do you get for your money? For life insurance, a site such as life-info.org.nz can help us understand what we’re paying for so we can gauge whether it’s worth it.

That’s far better than leaving it to games of chance.

Comments (5)

Gravatar for Tom

Tom

8:08am | 1 Aug 2016

Thanks Anand! Tman: one place you could consider is consumer.org.nz, which will give you independent reports on what's available out there.

Gravatar for Anand srinivasan

Anand srinivasan

10:16pm | 30 Jul 2016

Good one Tom. While insurance is important, but more important is the approach to type of insurance. Whileas material (car and content) is always price driven with direct marketing the same cannot be applied for Human capital risk. Without the involvement of an trained and experienced adviser client can end up with inadvertent non disclosures resulting in claim not being paid in future.

Gravatar for Tman

Tman

12:33pm | 2 Jun 2016

Thank you for the post. Is there a website or toll that compares car or content insurances?
Thanks

Gravatar for Des Morgan

Des Morgan

10:52am | 26 May 2016

AFFORDABLE HEALTH INSURANCE - FREE REPORT
We have put together an important FREE REPORT on the alarming state of the Public Health System in NZ to get the message out there that there are ways New Zealander's can have affordable Health Insurance to cover non urgent treatment costs.
You Can Download this FREE REPORT here:
http://www.healthinsurancefreereport.theportfoliocompany.co.nz
No one will be contacted after receiving this Report.
The goal here is to provide Kiwi's with all the facts so they can make an informed decision on the merits or otherwise of Health Insurance for them and their loved ones.

Gravatar for Russell Hutchinson

Russell Hutchinson

3:36pm | 24 May 2016

Good article Sorted and Tom Hartmann. I like that you don't believe that insurance is a gamble - quite the reverse, it is designed to reduce financial impact of risk. It is also valuable, even if you don't claim, for that very reason: you can deal with the known cost of a premium more easily than the unknown cost of a catastrophe.