In simple terms, insurance if you pay a little now to cover future major expenses due to illness, death, accident, or theft. Buying insurance is like storing grain for the winter months. When it’s used properly, insurance is a wise investment, especially if you’re protecting yourself against the cost of a catastrophic illness, which can devastate a family’s finances. Unfortunately, insurance has become a means to “protect” against every possible contingency and a few that aren’t even possible. This misuse of insurance can lead to greed, slothfulness, waste, and fear. But, worse than that, it can lead to dependence on insurance instead of on God.
Choosing an Insurance Company
One of the most important insurance decisions you must make is choosing an insurance company. After all, the timely payment of your benefits depends on that company’s stability. Listed below are some questions you should ask when evaluating a prospective company.
Choosing an Insurance Company
One of the most important insurance decisions you must make is choosing an insurance company. After all, the timely payment of your benefits depends on that company’s stability. Listed below are some questions you should ask when evaluating a prospective company.
1. What year did the company begin operations? A young company’s operating ratios may look good, but keep in mind that a company less than 25 years old hasn’t proved itself through a series of business cycles.
2. What is the company’s form of corporation? Insurance companies fall into two major categories: mutual companies and stock companies. Mutual companies are owned by the policyholders, who share in the company’s profits. These companies have been more inclined to provide better products for the consumer than stock companies, whose earnings may go to shareholders or to a parent holding company.
3. What company assets and insurance are in force? Bigger isn’t necessarily better. However, a very small company may have difficulty in a period of adversity. In addition, it may lack the expertise needed to handle a large case.
4. How has the company fared with the rating services? There are several rating services that rate insurance companies and financial institutions. A.M. Best—Located in Oldwick, New Jersey, A.M. Best rates over 4,000 U.S. companies. It is an independent research service that publishes an annual review of those companies.
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