The risk of risking insurance: Do you really need one?

Some of the things I really do not have a grasp for details are insurance, mutual funds, interest charges or anything monetary or numerical that will require talking to a lot of math geniuses. I hate math, period. The reason why I took up philosophy (besides being a fun pre-law course) was that there were only two math subjects. Every time my math teacher would enter the classroom, I felt like the clouds would darken, similar to an alien invasion. Since math bothers me, I thought maybe perhaps others are bothered with it too.

Insurance is basically making sure that you don’t lose the whole value of your investment, e.g., when buying a car. As soon as you buy a brand-new car, you automatically need to buy insurance. Some people might disagree on the concept of paying something annually and not being able to use it, somewhat like a gym membership that you actually need to use for it to work. Insurance is an annual investment that gives you a safety net against covered accidents. You buy the policy, then hope that the next time you see it is during renewal.

A QUICK DEFINITION OF TERMS:

Comprehensive—This basically means your insurance policy covers all the major problems areas: damages to your car, theft, third-party liability and personal accident insurance. Review how much is the coverage for each item before paying, to make sure you got all your needs. Although there would always be add-on features to any insurance policy, which will make it more bullet-proof, the basic comprehensive insurance package should help you sleep better at night.

Premium—This is the amount you pay for your policy. Usually, this is computed based on the basic package of coverage plus any additional items.

Deductible or Participation—When you get involved in an accident and make an insurance claim, you will be asked to “participate” in the cost. This is usually a small fee of about .05-1 percent of the value of your car. This is done to ensure you don’t abuse the insurance policy by claiming the smallest of damages and deter people from making fraudulent claims.

Acts of God/Nature—Basically, this is protection from all natural occurrences like typhoons, floods and earthquakes. Usually, this additional insurance feature is on top of the comprehensive insurance policy.

Third-Party Liability—This is the part of the insurance policy that is required by law; this takes care of anything we hit or damage with our car during an accident (people, other cars or property).

Personal Accident—This is the part of the insurance policy that takes care of our own hospital bills or, if we pass away, reimburses our family for expenses that may be incurred.

WHAT YOU NEED:

In claiming for insurance, you need to answer two basic questions: “Who will repair my car?” and “Who will pay for this repair?” A good place to start is to check if your preferred repair shop or casa is accredited by your insurance provider. Check which ones are reputable or have the capacity to provide the necessary protection that you need. Insurers will offer you the moon; but if these are the fly-by-night types, then don’t expect to cash in on any claim, if ever.

Think of it in this way: If you know you are in no way ready for a baby, will you use a brand of condom that you have no way of knowing whether it’s real latex or just lubricated ice-candy plastic? No you will not, so stick to the reputable guys.

Basically, the big companies here in the Philippines have their portfolio reinsured abroad so that they themselves are protected. Big insurance companies abroad of course are not stupid to take on just anybody; they will check track record, capital capabilities, etc. The website of the Philippine Insurance Commission (www.insurance.gov.ph) lists down the top 10 best insurance providers.

You alone (and sometimes with the help of your agent) can determine how much coverage you will need. According to Patria Echauz-Chilip, president of Standard Insurance, if you travel less than 5 kilometers every day, you might need less coverage than someone who travels from Luzon to Visayas on a weekly basis. Check also on how the company would provide service when you need them.

If you got your insurance from a dealership, and will have your vehicle repaired there, the dealer most probably would have done all the legwork. This would probably be the same with your insurance agent. Check if the insurance company has a wide network of branches, if they have call centers, or an online presence.

WHAT TO WATCH OUT FOR:

Check the exclusion clause, like terrorism, sabotage, riots, etc. Likewise, since all insurance policies are more or less the same, the differentiating factor is service and the ability to immediately act on your claim.

Chilip also mentioned that it would be best to inform your insurance on your claim within 30 days of the accident. The insurance company will also protect themselves from fraudulent claims. For example, if you claim your “Habagat” damages three months after the flood, the insurance company will think that you did this hoping to get a bigger claim after further corrosion of damages.

Make sure that your agent has really paid your premium. Demand for the official receipt from the insurance provider, not just from the agent.

With all this in mind, how would you want to play? Do you want to be on the safe side or do you want to play Russian Roulette, hoping to save a couple of bucks? If you decide to gamble, make sure you have enough anti-wrinkle cream to compensate for the stress.

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