When it comes to insurance most people are first concerned with losing major assets like their business, their autos, or their home. Secondly, they worry about meeting contractual or legal requirements like having liability coverage to drive their autos on public roads.
In these areas of property and casualty concerns, a risk of loss is clear and perceptible. So, we understand the value of obtaining insurance to protect against tangible and financial losses.
But there are also intangible assets we own that we may overlook. Some of these are in fact quite precious, like companionship, love, and even health and life itself. But before I get too far-afield and become philosophical, let me narrow the scope and address a few intangibles that are relevant to insurance.
Your Credit Behavior
Your character and responsibility are important factors for calculating risk for purposes of insuring you, similar to how you may be underwritten for a loan. When you apply for insurance an underwriter takes into account many things, for example: where you live -- in terms of geography, fire protection and population; they also weigh the probability of loss by fire or water by determining how long ago your plumbing and electrical systems have been inspected and updated where necessary; even a younger roof (recently replaced) receives credit because it is easier to repair and can withstand wind and hail damage more readily than an older, brittle roof.
In addition to insuring the home, an underwriter needs to evaluate the individual being insured. It has been shown that a statistical correlation exists between a Credit Based Insurance Score (or CBIS, and is similar to a credit score) and the probability of incurring more expensive or more frequent losses. This abstract line cannot clearly be drawn or seen directly, but the data has shown that the correlation exists. It does not measure income, marriage, or wealth; but rather financial behavior and responsibility. And since it does give a measure, most insurance companies have opted to add this in as a factor. After all, if one company did not where other companies did, that one company would be adversely affected by insuring more people with bad scores and higher loss probabilities.
All that explanation aside, the fact remains that since it is a considered factor, improving your Credit Score will enhance your ability to buy insurance at a more affordable rate, just like avoiding tickets and accidents. Speaking of which, you should count your Driving Record as another intangible asset worth protecting!
Claims Free Status
Think of this as personal risk management. By taking care of your home and taking care of how you live within it, you can avoid the potential for loss. An immediate reward is that you avoid the inconvenience and a claim deductible you would naturally incur should a loss occur. If a small or contained incident occurs, you can address it and fix the matter without turning in a loss. Doing so protects your Claims Free status, which is another valuable intangible asset which affects the cost of insurance.
Both your CBIS Score and your claims free status affect your insurability because they show companies that you are less likely than others to incur a loss and therefore deserve discounted rates.
Even though you can see it on your screen, your computer data is in fact considered an intangible item. Think of holding in your hand the ones and zeros that make up the data of your checkbook program, your email, and all your videos or pictures on your computer. There is an appreciable amount of value that cannot be purchased and therefore cannot be readily replaced by insurance, but you can ensure you won’t lose it if you create a good backup procedure.
There are electronic data policies which may cover the recreation of data, but avoiding the loss by having a current, off-site backup is always a far better outcome to a loss. And some data—such as videos or pictures—while it may be invaluable to you, can’t be recovered or recreated. So consider taking measures to protect against data loss, since it cannot always be prevented.
Your Life (in terms of your earning potential)
The fact that you can get up each day and go earn a living is very valuable to you and those who depend on you. This earning potential is your money machine. First and foremost, you should insure against its loss through your death, or its being diminished by an accident or illness. Imagine how your family will survive if you have insufficient or even no life insurance to replace your income.
In the cases of health or life insurance, disability income, and even long-term care, your insurability plays a major role. Beyond insurance, how can you protect that? Lifestyle choices: maintaining a healthy weight, keeping active, avoiding drugs and alcohol are all worthwhile actions, both for quality and longevity of life, but also in obtaining discounted rates for these types of policies. These healthy choices also offer the added benefits of preventing heart disease, obesity, diabetes, cancer, and other chronic health conditions.
Your Integrity and Trust Worthiness
Can your word be taken as your bond? Can others completely rely upon what you say over a handshake? Integrity certainly may be an intangible, but then maybe it isn’t because others can sometimes ‘feel’ when it’s not there. And in some cases, perception can become the reality so protecting your public image goes beyond actions in fact–your brand or good name can be damaged simply through associating with the wrong people or saying the wrong thing.
But why does it matter? Shouldn’t it matter?
As insurance underwriters we have various data sources and inspections upon which we may rely to help in determining a risk. It is easy to spot occurrences where an individual has not been forthcoming or may have been misleading in the information given for an application. Because the accuracy of this information is a condition of the insuring agreement, any questions of accuracy can cause a denial of a claim, at best, or at worst an accusation of fraud. Sometimes we can be mistaken or forget about certain items which may be relevant. But damage can be done, so protect your good reputation.
Pride in Ownership
Some of these things matter directly to the purchase of insurance, and some are just good lifestyle and risk management measures. When an inspection of a property is made for underwriting purposes some elements are viewed from the perspective of loss avoidance and protection while others are viewed from the perspective of safety or even reference of character.
If the home has clutter and debris strewn about, with little care given towards cleanliness and maintenance–what does that say about the possibility that this careless lifestyle may lead to a loss? One saying goes, “If this in the green, what then in the dry?” The insurance agent or property inspector has to make a snap determination. If it appears that there is a general lack of care, or concern, an underwriter may choose to decline the risk or be forced to choose a lesser desirable market which is not offering the best rates.
It should also be said that as we better attend to our home and our lives, we improve the society we live in and elevate the condition of our home, our neighborhood and our community. Intangible ideas can eventually affect a great deal in our lives.
Be sure to check out our Resources Listing which offers several relevant links and tools to help you in managing the risk in your life.