Posted on Dec 6, 2018
Insurance policies contain the equivalent to a 40 percent tax in their premium. This tax provides profit and expenses to the insurance company and makes up roughly 40 percent of the entire premium charged. Insureds take a deductible to reduce the premium charge and lower the tax otherwise paid as part of those premiums. Better to pay for an uncertain claim event than a certain tax included in the premium immediately. This is the reason for the old adage, “Never trade dollars with an insurance company.” The exchange rate is roughly 40 percent, and that’s not a good deal for you.