Insurance companies, like all commercial companies, operate for making a profit and not for simply protecting your interests. The claims they pay out are recovered by the insurer one way or another.
Law of Averages
Regardless of the type of insurance company you are dealing with, they all operate on a law of averages. That means, among any given lot of insurers, they know that those who claim any compensation are very few and the premium the company recovers from clients at the time of selling insurance cover gains them big profits. It is no wonder that they can afford to pay their agents high salaries and commissions. It is easy to see from the fact that, despite paying heavy claims to home and auto owners for the damage wreaked by Hurricane Katrina in New Orleans, the companies that provided the home owners and others with insurance made a record profit of nearly forty billion dollars.
Loopholes
Insurance companies employ various tactics to wriggle out of claims ‘legally’. This is usually done by making covering laws in such a way that the insured may think the insurance coverage provides the desired protection, but when a claim is filed it is void. People who had bought home insurance for the homes in New Orleans had bought insurance cover for protection against destruction by storm. When their properties were destroyed by the hurricane and they filed claims they found out that they were covered for destruction by storm only if the damage was caused by storm water and not by storm wind. Many claims were suddenly null and void. This may be quite legal and above board for the insurers but the poor homer owner who now had to suffer the cost of repairs.
Be Picky
It is incumbent on insurance buyers to be very finicky at the time of buying the insurance. Instead of taking for granted that such and such coverage is automatically granted, find out specifically what sort of damage is covered.
Remember, the insurance companies are out to earn a profit, not to provide some social service. If people buying insurance keep this in mind, they are bound to be protected against any untoward happenings.
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