Wisdom on Wealth: When the lowest price means the highest cost

  • July 23, 2018

BY: Byron Moore, CFP®

posted July 23, 2018

Byron R. Moore, CFP

Byron R. Moore, CFP®

Fifteen minutes will save you…

You can probably fill in the blank. Because one of the largest insurance companies in America has built a brand on the promise that spending fifteen minutes getting a quote from them can save you fifteen percent on premium costs.

I’ve never called those folks, so I can’t speak to the value they do or don’t offer. They do have cleaver ads, I’ll give them that.

But the higher the cost of failure, the more concerned I become when the first thing mentioned is price.

If I find myself wandering around the cereal aisle at Huge-Mart and notice that the Huge Mart brand of granola is $2 lower in price than a nationally advertised, well-known brand, what is my risk if I go for the low-cost option? If I find I just don’t like the cheapo brand, I’m out a few bucks.

But if I make a decision about automobile insurance based on someone offering me a low price, I need to wake up and pay attention.

I always encourage clients to imagine themselves one day after the event for which they were insured occurs. Do this for yourself… for what events or occurrences do you have insurance?

Someone might hit your car while it just sits there innocently parked outside your house one night. Or, you might hit someone else’s car while you’re catching up on the latest Facebook posts on your smartphone (I know you don’t ever do that…we’re talking about someone else, right?).

Your house might catch fire. Or it could flood.

Or you might get very, very sick. Perhaps to the point where you could not work to earn a living.

You might even die. Well, actually, you will die. It’s just the timing that’s in question.

So, imagine yourself contemplating your future after one of the above-mentioned events has occurred.

Are you going to be saying to yourself, “Wow. I was so clever. I shopped around, found insurance with the lowest possible coverage limits, which cost me the lowest premium possible. I sure do feel good about my decision…”

Let’s do this thought experiment in a slightly different way.

Suppose you were sitting there, post-calamity, and your phone rings. It’s your insurance agent. She has no idea what just happened because you haven’t even called her yet. But she says, “Hey I just wanted to tell you that your insurance company is having a flash sale. For the next 24 hours, you can buy as much (fill in the blank) coverage as you want, no questions asked, effective back to the first of last month. How much do you want?”

OK, we all know that phone call is never ever going to happen.

But if it did, what would your answer be?

Whatever that answer is should be pretty close to the amount of coverage you should carry now. Because if that’s the amount of coverage you would want if the event occurred, isn’t that the amount of coverage you should have?

I’m amazed at how many people have never thought it through that plainly.

The only reason you don’t have that amount of coverage is your perception of the cost.

Here’s the lesson – when it comes to buying any kind of protection, don’t start with the topic of cost. End with it. Start with how protected you want to be. Then let price be the last thing you discuss. Once you know what you really want, then you can work on getting as close to ideal as your pocketbook will allow.

Sometimes people find out the hard way that the protection coverage they thought they couldn’t afford, was protection coverage they couldn’t afford to be without.

When it matters most, think less about the price and more about the cost. The true cost.

I’ve got a checklist you can use to help you gauge your protection coverage. If you’d like a free copy, email me at bmoore@argentadvisors.com and ask for my Protection checklist.

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