When Tragedy Strikes

LISTEN TO INCREASE — When Tragedy Strikes

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Today, we’re going to talk about a topic I have devoted my life to professionally. Yes, your favorite subject! Insurance! 

I know, I know. Who doesn’t love a good conversation about deductibles and coverage limits? Sounds thrilling, right? Obviously, I’m kidding. Insurance has a reputation for being a total snooze fest. But stick with me, because insurance plays a critical role in the financial foundation you’re working so hard to build. In fact, if you have been following along, Adequate Insurance is Step 4 on our Fuel Gauge. 

Here’s my simple definition of insurance: it’s taking a small financial loss today so you don’t have to take a potentially devastating financial loss later.

Now, that may sound strange—why would I describe insurance as a loss? Let me explain.

If someone’s house were to burn down, do you think most people could afford to rebuild it with cash? Probably not. That same problem existed hundreds of years ago with ship owners in England. There’s a true story about a group of merchants who gathered regularly at a man named Lloyd’s coffee shop. They would share stories about ships that had sunk at sea and how financially ruinous it was to replace them.

Eventually, someone had a realization: only a few of them would lose a ship in any given year, while the rest would be just fine. So why not pool their money together? Everyone would take a small loss each year, and when someone’s ship sank, the group would absorb the cost together instead of one person being wiped out.

That coffee shop eventually became Lloyd’s of London—one of the oldest insurance companies in the world.

Today, we call those small losses premiums, but the principle is exactly the same.

Some people truly don’t need insurance. Those people are called independently wealthy. When your house burning down is nothing more than an accounting inconvenience, insurance becomes optional. But for the rest of us, we can’t afford to not have insurance. We can handle small, predictable losses over time—but we can’t survive one massive financial blow.

Now, insurance shouldn’t be used for everything. I was recently checking out at a store when the screen asked if I wanted to buy insurance for a $50 item. No thank you. That item is already covered under a homeowners or renters policy, and even if it wasn’t, I can afford to lose $50. I don’t need to insure small risks I can easily absorb. Even though I’m in the insurance business, I believe in keeping as much money as possible and only paying insurance companies what you absolutely must.

But here’s the other side of the coin.

Early in my career, I received a call from a mother who had just purchased insurance through our agency. She was sobbing—not because she or her family were physically hurt, but because her daughter had been involved in a tragic accident. At dusk, while turning left, she didn’t see an oncoming motorcyclist. He was killed instantly.

In the months that followed, the family was sued, and understandably so. The settlement exceeded one million dollars.

Friend, we live in a broken world where terrible things happen. Most people will never save enough cash to protect themselves from the financial consequences of those kinds of tragedies. But most people can afford a small, consistent premium.

That’s why adequate insurance matters. My client was heartbroken—but she wasn’t financially destroyed for the rest of her life. And that protection is a crucial part of a solid financial foundation which is why Adequate Insurance is Step 4 on our Fuel Gauge. 

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Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.