Thursday, September 17, 2009
Insurance During a Recession
By Shawn Chandok
Although Mr. Bernanke declared the financial crisis over, many people are still foreseeing an uncertain future. In order to create profits, individuals and companies both follow one of two strategies: increase profits or reduce costs. As expected, most people choose to reduce costs during a depression. One of the most common costs people try to reduce is their insurance expense. This is actually very bad response because any cut in insurance increases your risk for the possibility and the overall purpose behind insurance is to lower risk. Here are some tips on which insurance policies to keep during a recession broken down by your wealth position:
For the wealthiest, an umbrella policy is the answer. This policy protects you against lawsuits and is very crucial during a financial crunch. For example, “In a tough economy, it’s more likely that someone will sue because everyone’s looking for a buck. In a good economy, people may look the other way. In a bad one, that person may suddenly say: Here’s the lottery — Ms. Mercedes-Benz just plowed into me and my neck hurts.”
For the middle/lower class, life insurance is predominately the main concern. This is so because “Wealthier Americans tend to protect what they have, but those with more modest means can’t afford to lose what they have.” However, as I had mentioned earlier we are seeing even this strategy being exploited by Wall Street investors.