Name your own price for insurance? Name your own price for insurance can be dangerous and misleading because insurance isn’t like negotiating the price of a car or a hotel room. The premium is tied to the amount and type of risk being transferred . Here’s why: A lower price can mean less protection. If you choose an unrealistically low premium, the insurer may only be able to offer that price by reducing coverage, increasing deductibles, adding exclusions, or limiting benefits. Insurance pricing is risk-based. Factors such as driving history, location, claims history, property characteristics, coverage limits, and the likelihood and potential cost of a loss affect what coverage reasonably costs. Consumers generally can't simply declare what that risk should cost. The cheapest policy may create a false sense of security. Someone might think, “I have insurance,” but discover after an accident, fire, lawsuit, or other loss that the policy doesn't provide enough...
Investment and economic observations by N. Russell Wayne, CFP, MBA. Mr. Wayne is the president of Sound Asset Management, inc. and former Managing Editor of The Value Line Investment Survey.