Life Insurance

Your money or your life

We've all seen the old movies, full of masked highwaymen stopping the stagecoach in the wild west or the carriages trundling across eighteenth-century Europe. We wouldn't expect to hear it from an insurance agent - although I imagine if some enterprising insurer did cover his face, carry sixshooters, and strike a swashbuckling pose, he might sell a little more life insurance.

Because, incongruous as it might seem, this is the deal life insurance offers us. And, if you look at it coldly, it's not that bad a deal. If you're lucky, you pay your money, you live, and your insurer makes some profit. If you're unlucky, you lose your life, but your family get a few bags of cash which, while they won't relieve the distress of losing a relative, might ease the financial strain they'll be put under.

And this might explain why life insurance is, in fact, both a good deal and a good for society as a whole. A life insurance agent is less Dick Turpin and more Robin Hood. Like that great bandit of Sherwood forest, a life insurance agent takes from the fortunate (thos who continue to live happily amongst their relatives) and gives to the unfortunate (those who have lost a relative). Keep that in mind next time you're tempted to sneer at insurers as social parasites: not only do they redistribute wealth in a way that would make the most charitable among us proud, but they do it in an efficient, free-market way, without the involvement of government or charity. And - until now, at least - without guns, masks, or raids on the turnpikes.

Of turnpikes and premiums

By now, a few of my more historically-minded might be taking exception to the connection between life insurance and highway robbery (and no, I'm not talking about the idea of dick Turpin with a six-shooter). The random attacks of a highwayman are quite different from the steady payments of an insurance premium.

And they're right. You can only push a metaphor so far before you need to conjure up a puff of smoke, wave your hands, shake your sleeves, and generally embrace the magician's art of misdirection. Meanwhile, cursed by literature students across America, it's time to mix metaphors.

If the way of the life insurance agent isn't quite one of the highwayman, maybe it has something in common with the turnpike. For those of you rusty on your road history, turnpikes came about, more or less, as follows.

The first toll roads, or turnpikes, were in areas prone to bandits - remote mountain passes in the late Roman Empire, after the fall of 'Pax Romana' and the rise of Germanic tribes keen to get booty from travellers. They made a deal: you pay us some money, and we'll make sure you get safely to the other end of the road.

Notice what's happening here, same as with life insurance. You pay your money, you get a bit of security that things are going to turn out OK. Your life insurance premium might not be quite the same as the fee you paid to cross the alps on a toll-road, but there's certainly a connection

High premiums and dangerous country

Let's take this a bit further. Why might your life insurance premiums be so high? Well, why would you be charged more on a toll-road. Perhaps you're carrying a lot of money. The life insurance equivalent would be that you want a lot of money to be paid to your relatives, should the worst happen to you. The more liability you're asking your insurer to bear, the more you should expect to pay for it.

The second reason you might get charged more is if you're heading into dangerous country. In life insurance terms, that might mean that you're working a dangerous job, you're susceptible to some illness, you're old, or any number of similar situations. Rest assured, your life insurance agent will have detailed actuarial tables telling them exactly how likely you are to kick the bucket on any given day.

There's a third reason you might get charged more: the man operating the turnpike might think he can trick you into paying more than the standard fee. He might offer you add-ons you don't need - new horses for your carriage, perhaps, or a decrepit relative riding shotgun. Just in the same way, when you buy life insurance you can count on somebody trying to 'up-sell' you into buying some useless trinket. Don't fall for it: know what you want, ask for all the benefits you need, and don't get anything extra just because it sounds nice.

If they can't 'up-sell' you (you like your horses, and you don't want his uncle on board), the man at the toll-booth might try to charge you more just because you can. "You don't want to take the long way round", he'll tell you, or "The fee has been this way for 200 years, and I'm not reducing it for you". Well, that may be true for toll-booths, but it sure as can be ain't true for life insurance. Remember, as the customer, you're the one in the strong position, and you should make the life insurance agent beg you and offer you reductions. If not, you can always go elsewhere.