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Okay, this is
not a serious page. I just love the
term "self-insurance," so
here's a riff on it.
Feel free to go to the main Insurance
page, or to Funny
Stuff.
Self-Insurance...Wha'?
It used to be that if you had a doctor's
appointment or a fender
bender or you dropped
your camera and it broke,
you paid the doc for his/her time,
you paid the body shop to fix the
dent, you bought a new camera and
that was that.
In life, stuff happens.
But that was in the days when the
car was a Model T Ford, the doctor
charged US$1 for an hour's consultation,
and the camera was a Brownie.
Nowadays a shattered tail light can
cost as much as the original Model
T, ten minutes with the doctor ("take
two $100 pills and email me a month
from now—if you're still alive")
can add a year to your mortgage (at
least in the USA it can), and a bump
or a humid day can wreck a $500 point-and-shoot
digital imaging device.
So we've got insurance.
Insurance started out as a mutual thing: "somebody's
barn is gonna burn down when lightning
strikes, so let's all chip in a little
now so one of us won't have to pay
a lot later."
But to make sure everybody would cough
up and the money would actually be
there when the bolt landed,
every barn-owner had to pony
up the dollar on the spot.
So now there's a pile of money in
the middle of the table and nobody
knows what to do with it.
"You keep it, Lester," says
one guy, so Lester does. He takes it
to the bank so it won't disappear in
booze or bonnets.
The money earns interest!
The lightning doesn't flash, and one
day out there hoeing the sorghum, Lester
has a bright idea of his own.
A light bulb goes on in his
head and pretty soon the
sorghum is only a sweet green memory,
he's given up farming, and he has
himself a new business collecting
and investing insurance premiums.
What if lightning NEVER strikes?
Everybody only loses a little. Lester
wins big.
Lester wins so big that he can afford
lots of protein for
his kids, so Lester Jr. and the Lesterettes
grow up brilliant and—no dummies,
they—go into the insurance business.
It beats farming, where lightning may
strike your barn at any time.
Pretty soon there are lots and lots
of people declaiming that It's
a Dangerous World Out There and You
Had Better Do Something To Protect
Yourself and, not coincidentally,
selling insurance. Full-page ads. Broadsides
on buses. Taxi-toppers.
Meanwhile, hundreds of farms lie abandoned,
their former owners (currently insurance
agents) not caring a hoot if lightning
strikes the barn or not.
But of course lightning does
strike. That's how it operates.
The question, then, is: what is the
probability, the risk,
of lightning striking? And how much
are you willing, or can you afford,
to lose if/when it does?
Some risks—car, medical, fire-and-flood—are no-brainers.
Bite the bullet and pay the premium.
As for the others...
There wasn't a word for it until insurance
became so important (which
happened just about the same time Lester
got rich). Before that, stuff
just happened and you paid for the
bad parts.
But now, if you choose not to pay
someone else to insure your loss, you
automatically become an Honorary
Lester, auto-start your
own little one-person insurance company,
sell yourself a virtual policy and
make a deal with yourself not to pay
any premiums unless you, the virtual
policy-holder, actually make a virtual
claim.
Such a deal! Try
to get that from your regular insurance
company.
When bad stuff happens you, the One-Person
Self-Insurance Company,
pay the claim—real money this
time—out of your own pocket:
you take the money out of your left
pocket and put it into your right
pocket, and shake (your own) hands.
In other words, all the premiums
come
due
at once—and
perhaps then some—but the claim
has been paid!
Ta-da! You're self-insured!
Ironically, you don't feel any more
safe or secure under this arrangement—even
though you are the insurance company
so presumably you won't welch or cavil when
it comes time to pay a claim.
Unlike Lester, running your own little
one-person insurance company tends
not to make you rich. In fact, if you
actually have to pay a claim, you
may end up poorer.
Or not. What if,
like Lester, lightning never strikes
and you never have to pay a
claim?
Forget the barn. How are you
at math?
©2003 by Tom
Brosnahan. All rights reserved.
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