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Thursday, April 16, 2009

Insurance Problems and the Economy

By Rick Amorey

The concept of insurance is getting a lot of mishaps in recent news. Something that is normally considered as a way to lessen financial risk is now ending up a factor that actually increases it. Nowadays, with the downhill trend of economy that we are currently facing, insurance companies that declare bankruptcy is a frightening prospect for a lot of people who have done business with them.

But why the distrust with insurance companies these days? There are speculations that it's because of a company's direct refusal to insure a person with a high likelihood of loss. For example, someone who engages in extreme or contact sports will have a low chance of getting life insurance. If you're someone with a high-risk profile, you may have problems getting legally insured. To a lot of people, this is the exact opposite of what insurance is.

Which leads us to the question: What is insurance supposed to be? Many of us invest in insurance without completely understanding how this affects our finances. In anything concerning money, a blind investment puts it in serious risk.

At the heart of it, if you are buying insurance, you are essentially accepting a definite loss of assets (the case being, the payment of a periodical premium) so that even more losses will be averted. But, the loss should be accidental; an insured person cannot deliberately cause something that will allow him or her to gain insurance money. Although it's understandable, there are quite a few unsavory characters who have purposely gotten themselves hurt to gain insurance

This is where problems come in. The concept of mitigating an accidental loss becomes an issue if the company suddenly declares bankruptcy. If so, you would definitely feel like you accepted a devastating loss without no compensation whatsoever. And this is what angers a lot of people. - 23208

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