One of our initial questions for a new client is “Will you be looking for real insurance or the appearance of insurance?”
Silly question you might say because who actually wants the “appearance” of insurance? Actually more times than you might expect a client may respond “I really just need to show I got coverage.”
- Wellness programs – some employers just want to say they did it?
- Job requirement – contractors sometimes just need to check a box on a bid form saying they have a coverage.
- Car insurance – using personal auto coverage for a commercial vehicle.
There are more examples but I think you get the idea.
The typical reason for taking the “appearance” approach is to save premium dollars for a coverage or benefit the client sees no real need for, and that they do not ever expect to use for a claim. “There was this box on a form asking if I have that coverage so I just said yes to get the work!” I would tell you that is just asking to waste insurance money and set yourself up for disaster.
It is important to understand that insurance is a contract to accept risk not a product like your car tires or new cell phone. Under the contract the insurance company agrees to do specific things if a “covered” event (risk) occurs. Risks that have not been included are not covered and it really only matters when the claim is for more that you could ever hope to pay for.
When you purchase the “appearance of insurance” you typically get a contract that is much cheaper but also has been severely limited to achieve that lower cost. That does not mean these policies may not have value it only means you need realize the restrictions and then not be surprised when an event is not covered.
For more information, contact Bill Weaver, Focus Benefits Group, 602-381-9900