Business Viewpoint: Don't risk not understanding your insurance risk
BY JOHN WISCAVER Business Viewspoint
Thursday, July 26, 2012
7/26/12 at 3:14 AM
As we all know far too well, dealing with weather is a big part of living in Oklahoma. From spring tornados to winter storms, we all face the possibility of weather affecting us and damaging our homes, vehicles and personal property.
Over the past five years, Oklahoma has faced some of the most significant damage in decades from spring storms, wildfires, and ice and heavy snow. Meteorologists and weather experts are reliable sources for short-term forecasting, but weather events further into the future are much more difficult to predict.
Insurance was originally established centuries ago to help individuals and businesses carry the burden of the unknown. For a fee, insurance companies would cover the cost of a covered loss so the person would not be financially devastated.
Insurance offers security and the ability to purchase property and autos with financing.
The concept of insurance is that the losses of a few are made good by the contributions of many. It is based on the law of large numbers.
Insurance of property is based on the principle of indemnity. The idea is to bring the insured to the same financial position as before the loss occurred.
Insurance safeguards the investment in property but never was intended to be a maintenance policy. Insurance companies cannot manage their business nor stay in business without responsible underwriting of their overall risk.
However, over time, many insurance consumers have viewed insurance as more of a maintenance contract and less of a risk-management contract.
No two insurance consumers have the same exact needs, and the level of risk an individual is willing and capable to take on may vary greatly. You should choose a policy with a combination of coverage, premium and deductibles that you can comfortably afford without creating unnecessary financial hardships.
It is very important to work with an insurance agent who can help you identify a policy with the right balance of premium and deductible for your specific situation. Understanding your risk tolerance will help you make a sound insurance decision while also ensuring affordable coverage well into the future.
A common misunderstanding is that if you choose a low deductible, you can file a claim for smaller losses and pass on more of the cost of the repairs to your insurance company. While it may seem helpful in the short term to make a claim to cover a smaller loss, it may not be beneficial for you in the long term. Filing several claims, even small claims in terms of damage and repair costs, can increase your premium, or even create the possibility of a loss of coverage.
Over the past five years, Oklahoma has faced the greatest level of underwriting losses in the history of the insurance business in our state. To keep insurance available and affordable, individuals and business owners need to re-evaluate their policies to ensure they are adequately covered and at the same time manage their overall risk efficiently.
Original Print Headline: Don't risk not understanding your insurance risk
John Wiscaver, vice president of public affairs with Oklahoma Farm Bureau Mutual Insurance Co., has 25 years of experience within the industry. He is co-chair of the Oklahoma Insurance Department's Catastrophe Response Task Force.
The views expressed here are those of the author and not necessarily the Tulsa World. To inquire about writing a Business Viewpoint column, email a short outline of the article to Business Editor John Stancavage at john.stancavage@tulsaworld.com. The column should focus on a business trend; the outlook for the city, state or an industry; or a topic of interest in an area of the writer's expertise. Articles should not promote a business or be overly political in nature.
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