As an insurance salesman for many years, it often puzzles me why people don't buy sensible protection. Why "self-insure" a large risk instead of buying affordable protection? Here is my "Top 10" list of why people don't buy insurance.
1. It is not required.
You may be required by a business contract, bank loan or state auto liability requirement to buy insurance, however, in most cases, protection is a choice. No one requires you to buy higher auto liability limits beyond minimum requirements OR to protect your assets beyond the bank lien requirement OR protect your family with Life Insurance. Many people don't believe in buying something that they are not required to buy regardless of the value.
2. Some Don't Believe in Insurance
Sometimes a client will only buy the coverage required and then only begrudgingly. They have no belief that the insurance has any value and consider any money spent on it to be a waste. No discussion of their potential risks or how insurance can be helpful will have any impact.
3. Cultural Heritage does not Value Insurance
I have observed a cultural component to buying insurance. Since insurance is a product of the sophisticated, capitalistic economies of Europe and North America, if you are outside of this cultural group, you are less likely to value the protection. My experience has also been that people of recent Asian heritage typically are less focused on buying coverage. My office helps many first, second and third generation Mexican-American's in our Austin, Texas, community and we can see the progression as each generation becomes more Americanized in their attitude about insurance.
In my experience, the opposite is also true. People of recent English heritage (or English educated) typically are very focused on their potential lawsuit risks and often buy broader protection including higher liability coverage than my average client. This makes sense because of the long history of insurance in England.
4. Uneducated on Their Financial Risk
Many people buying insurance don't have the experience or understanding of their potential financial risks. For example, one-third of the people in Texas who are uninsured for Healthcare expenses have more than adequate incomes to buy health coverage but make the choice not to. A major injury or illness can cost far more than they realize. I believe that their choice not to buy at least a catastrophic health plan speaks to the lack of understanding of their potential risk.
5. Denial of Known Risks
This is the "it won't happen to me" self-insurance plan. I see it all the time; clearly understood risks that can be economically insured, but the risk is ignored.
6. Misunderstands Risks
People buy coverage "backwards" everyday. For example, a low deductible on auto collision is purchased but important higher liability limits are not considered. If you understood your risk, the much greater financial risk is a lawsuit after a bad auto accident. The couple hundred dollars difference in your collision deductible is trivial.
Another example is buying Accident protection instead of Life Insurance. Most people don't realize that you are four times more likely to die of an illness rather than by an accident. Many people misunderstand their risk and think that accidents are more likely.
7. Intangible Product
Beyond a policy document, insurance is an intangible product. It is a conditional contract with a promise of potential future financial benefit, not an automobile or box of chocolates.
8. Confused about Insurance Choices
This is a common problem. Too many choices with too little understanding of the choices are a recipe for confusion. A confused person won't buy the protection they need.
9. Unfavorable Attitude toward Insurance Companies
Sometimes people know they need to buy protection, but don't trust that the insurance company will fairly pay claims. Maybe they have had a bad experience or didn't understand a claim outcome in the past.
10. Lack of Funds
If insurance was free, everyone would buy wonderful protection. The reality is that coverage does cost money and you have to pick and choose what you buy.