Insurance Contracts: Price and Quality

Recently in class we have discussed insurance contracts at depth, including influences of such things as deductibles, limits, and coinsurance. The one aspect I found most interesting is the fact that most people focus all their attention on price in deciding upon an insurance contract. Most people don’t realize that the quality of an insurance contract is a huge factor that needs to be considered, as it has a strong influence upon them.

For example, I found an article discussing how much time and effort it takes for insurance companies to determine the pricing for their various plans. Insurance companies take a great deal of time to put together these contracts because they have quite complex legal provisions and contractual terms within them. They also often spend millions and millions of dollars on lawyer’s fees and many of them have groups of professionals who are analyzing and amending terms of their contracts to cover any possible outcome.

Therefore, I think that overall people need to be more aware of the details involved in the insurance contracts they are becoming involved in. Many times people simply focus too much on the price and make a quick decision. Most individuals don’t have a great deal of time to get familiar with the contents of an insurance contract and simply glance over a contract before going with it.

Though many insurance contracts one may be looking at will be quite similar – whether this be car, medical, mortgage, life insurance, etc. There are differences between companies, and one should especially pay attention to the quality of them companies – in terms of their financial data, such as the assets they hold, and their investment grade. One also should pay close attention to what exactly is covered in the insurance plan. Many times insurance contracts are drawn up with certain exclusions, and one needs to read closely to see what they really cover. For example, a person may need coverage on something that is excluded, which they could get if they only paid a little bit extra. This is something that needs to be determined before a problem or claim arises. In some insurance contracts there are also some exclusions and conditions that one must meet to keep the policy valid, so this needs to be taken into consideration as well.

I feel like another thing that needs to be taken into consideration more by individuals, is to purchase insurance in the first place. I personally have several friends that don’t have medical insurance, or even car insurance (which is not only dangerous, but also illegal). I found another article that examined the importance of purchasing insurance. This article focused on five groups: health insurance, life insurance, car insurance, property insurance, and casualty insurance. Life is quite unpredictable, and one can’t simply hope that unfortunate events will not occur to them; therefore purchasing insurance provides protection from these things. Though insurance may cost money in the short run, the money it will save in the long run, and the security and peace of mind it provides are certainly worth it.


Necessary Insurance

Understanding Insurance Contracts