Insurance products protect income, health, and property. In the Pillars of Wealth context, insurance products may be viewed as protective domes or moats that surround and protect our pillars from dangers. Each insurance product adds an additional layer of protection against a specific threat. Our personal or household circumstances determine whether and how much insurance we need.
Insurance is state-specific. There’s no federal body regulating insurance companies. Instead, each state has its own insurance Commissioner. While insurance-related laws are similar across most states, California and New York stand out as distinct outliers. Insurance agents often grumble about how much more annoying it is to comply with California and New York insurance rules. This isn’t directly your problem, but it’s useful to be aware that the differences exist.
Insurance agents are compensated based on commission, which is tied to the amount of coverage they sell. They are also generally not fiduciaries. This raises an ever-present concern that an agent may try to sell you too much insurance, or the wrong product.
Insurance agents are taught that consumers can be influenced most effectively using one of two emotions: fear and greed. They like to bombard us with scary statistics on the prevalence of disabilities, the likelihood of lawsuits, the probability of property damage, as well as morbidity and mortality rates. And they shamelessly seduce us with promises of great financial rewards, e.g., aggressive returns on annuities and variable life insurance policies, as well as tax-free death benefits.
Since insurers have been doing this to hapless consumers for centuries, laws against misrepresentation are quite stringent. But this doesn’t stop agents from using unfounded implications when they have us behind closed doors. If in doubt about any assertions made by an agent, take some time to confirm what you’ve been told. Then consider carefully whether you really need the protection in question.
The observation that an insurance agent appears less than 100% sincere doesn’t automatically mean you don’t need the coverage, but it does mean you should speak with a different agent.
Some young doctors’ feelings of invincibility combine with their distrust of the insurance industry to yield a decision against purchasing insurance. But, like other people, doctors can get sick or disabled, and they can contract a terminal illness or die prematurely due to a tragic accident. One of my father’s best friends, a physician in his 40s, diagnosed his own terminal illness. He did not have life insurance. Another family friend, a surgeon, developed a tremor and could no longer operate. He did not have appropriate disability insurance.
Be prepared! Secure appropriate coverage to protect yourself and your family.
The features and conditions of insurance offerings change over time. Consult a properly licensed insurance agent for the latest details.
We begin this chapter with a discussion of the role of insurance in mitigating pure risk, how to identify good insurance companies, and related terminology. We end the chapter with deeper examinations of disability, property & casualty, and life insurance.
 Insurance can also ensure the continuity of a business. See Book II of the Pillars of Wealth series: Business Essentials for Medical Practices.