We recently got a copy of Jill Schlesinger’s book, The Dumb Things Smart People Do With Their Money. What caught our eye? An entire chapter devoted to insurance, of course! A lot of curiosity and a little bit of skepticism made us wonder how Schlesinger would write about insurance. And we thought that you might want our take on her “Dumb Thing #11,” so in a three-part series, we’ll give you the Cliff Notes version of Schlesinger’s chapter entitled, “You Buy the Wrong Kinds of Insurance, or None at All.”
Let’s set the stage with Schlesinger’s reputation among insurance carriers: She’s a self-described critic of insurance companies’ “slick marketing and opaque sales techniques.” (Not our favorite words, for sure.) However, she values what insurance does in helping people transfer risk, and it’s on that basis that she focuses her chapter.
As a self-proclaimed critic of insurance companies, Schlesinger still calls insurance the “sweetest freaking thing [she’s] ever heard of!” Huh??! To understand where she’s coming from, we really have to go back to the principles on which insurance is founded. We have to talk about risk. Every day, you’re taking a risk—driving a car, walking across the street, living near a body of water. You handle a lot of risk yourself and don’t even think about it…like looking in both directions before you cross a street. But there are some risks that you couldn’t possibly take on your own. And that’s where insurance comes in.
“You can live your life and pay someone else to take on the risk for you,” says Schlesinger. “If you pay a tiny bit of money today to a group of strangers called an insurance company, those strangers will assume the risk today and pay you…” As you know, insurance companies make a living by taking on your risk, pooling it with lots of other people, and paying out to the unlucky few who do experience a calamity of some kind.
When you think about the risk that you get to transfer to the insurance company for the little bit of money that you pay, it’s the best deal around! For a few hundred dollars, you can insure your home and all its contents…thousands upon thousands of dollars worth.
Next installment: Avoiding the Insurance Danger Zones.
Article based upon: Schlesinger, J. The Dumb Things Smart People Do With Their Money. (2019) New York: Ballatine Books.