Putting A Well-Reasoned Perspective On The Value of Insurance

By Richard A. McGrath, CIC, LIA

To understand the benefit of insurance, imagine a world without insurance.

Not having insurance to help you manage the risks you face every day would have a negative impact on just about every facet of your life.  Consider just a few examples:

Healthcare

Our healthcare system today is expensive, but it would not even exist without insurance.  Drugs to cure or control cancer, heart disease or other illnesses would never make it to market, because the potential liability drug companies would face would be far too great.  Anti-depressants, painkillers and other important drugs already available would be pulled off the market.

Even if drugs that cure diseases were still produced, there would be no one to prescribe them.  What doctor would practice medicine without malpractice protection?  Those who dared could lose everything if a patient sued; even a doctor who followed all protocols flawlessly could lose everything in a malpractice suit.

It’s unlikely you would be able to have X-rays taken, get your teeth cleaned by your dentist or receive physical therapy.  Surgery would not take place and those with mental illnesses would need to cope without the benefit of psychiatric care.

By protecting the healthcare industry as well as the patient, insurance makes the practice of healthcare possible.  It protects drug companies and medical device manufacturers from catastrophic claims that could put them out of business.  It ensures that doctors, nurses, hospital administrators and others get paid, creating jobs and a degree of financial stability.

Your home

Without homerowner’s insurance, consumers would face potential ruin.  If your home caught fire, you could lose everything.  Even if your home were not destroyed, a flood, a hurricane or some other disaster could leave you with tens of thousands of dollars of out-of-pocket expenses.

It could be equally damaging if someone were hurt on your property.  Without the protection of liability insurance, the injured person could sue you, and you might give up your home or at least your savings to pay any settlement.

Your car

Without auto insurance, you would have to worry not only about the consequences of your own driving, but the actions of every other driver.

In today’s economy, an increasing number of Massachusetts drivers are uninsured, in spite of a law requiring that all drivers have insurance coverage.  When these drivers cause accidents, they often lack the financial means to pay damages resulting from the accident they caused.

Without auto insurance, we would all face the potential for financial ruin every time we drove.
Your family.  Life insurance is most often used to ensure that family members will be able to continue to support themselves if the family’s breadwinner dies.  Disability insurance, likewise, provides funding in case the breadwinner becomes disabled.

What if the family lacks this coverage?  A tragic loss could become doubly tragic.  The family would have to find another means of support or adjust to a lower quality of life.

Your business

Few businesses would be formed and fewer still would remain in business without insurance protection to mitigate risk.  Businesses today face potential lawsuits based on charges of product liability, breach of contract, wrongful termination, sexual harassment, age discrimination and more.

Many lawsuits are justified, of course, but many are not and still cost the company millions of dollars.  Even the best companies cannot control every action taken by every employee.  Insurance provides the protection the business needs to operate.

Insurance serves other purposes, too, such as protecting a company in case of the death of a key employee or creating a means for one or more owner to purchase the interest of another owner in case of death.  While no one likes to think about such circumstances, preparing for them ensures that the business can continue and that jobs can be protected.

Your free time

The risk of owning a boat, a recreational vehicle, a motorcycle or a snowmobile would be too great without insurance.  Skiing would be out and swimming would likely be limited to the wading pool.

Your legacy

Heirs who inherit businesses and farms often have to sell them to pay their taxes.  Life insurance, when held in trust, gives individuals an opportunity to pass on wealth to their children without having it subject to steep estate and income taxes.

It creates an opportunity to pass on the wealth you’ve worked for all of your life and ensures that the business you’ve created will survive into the next generation.

New Needs Arising

If anything, insurance is more important today than ever.  Globalization of business and an increasingly litigious society have made insurance coverage essential for any business.

Consumer needs are also changing.  For example, the Internet has made identity theft the fastest growing crime in America.  Insurance cannot prevent someone from stealing your identity, but it can help ensure that you are able to recover financially.

As these examples show, insurance contributes greatly to the vitality of our economy; without it, our way of life would be greatly impaired.


Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  He can be reached at rmcgrath@mcgrathinsurance.com.

This article is written for informational purposes only and should not be construed as providing legal advice.

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