Covid-19 has changed so much in our lives. The repercussions will be felt for years with some permanent changes.
Since the pandemic began, there has been much debate over the role of insurance companies. The issue is whether they should pay claims related to Covid-19, even when these events were not covered.
Earlier this month, New York retailer chain Century 21, filed for bankruptcy and announced that they would be closing their stores. Century 21 stated that ”We now have no viable alternative but to begin the closure of our beloved family business because our insurers, to whom we have paid significant premiums every year for protection against unforeseen circumstances like we are experiencing today, have turned their backs on us at this most critical time” Century 21 files for bankruptcy and will close all of its stores.
What Century 21 does not mention, is that they did not pay premiums for insurance that covers a pandemic. If your house were to be damaged by an earthquake, would you expect your auto insurance company to pay a claim?
While it's easy to blame the insurance industry, it's really about financial preparedness and financial literacy. An insurance company cannot pay out claims on a risk that they are not insuring. Insurance companies base their premiums mostly on potential claims. The concept of insurance is based on pooling risk among a group of policy owners.
Century 21 is not a failure caused by the insurance industry. Either Century 21 did not understand what type of insurance they had or their insurance agent did not provide them with the expected coverage. This ties into this month’s theme of reviewing your insurance and being sure to understand if you have the right type of insurance to meet your needs.
Review all of your insurance policies and compare your coverage to what your risks are. This was covered in my blog post: “Does Your Insurance Match Your Risks?”.