Insurance is used as a tool to reduce  risk.

Insurance was used long ago by ancient Chinese and Babylonian traders to limit the risk of losing valuable shipping goods. It was achieved by spreading the cargo amongst several ships to improve the chance of not losing it all – a former version of ‘don’t put all your eggs in one basket’.

Today, it is used extensively to reduce risk and it comes at a cost. Some of it is mandatory such as auto, CPP (Canadian Pension Plan) and home (if you have a mortgage).

Many forms are optional such as life, extended health care, disability, critical illness, long term care, travel, loan, title deed, annuities and business.

Insurance is not the most riveting of subjects and it’s sometimes viewed as a ‘necessary evil’. If properly used and understood, however, it can provide peace of mind and a happy outcome to some unfortunate and unforeseen circumstances.

Here’s a story which may help enliven the subject. It’s a true story and won first place in a criminal lawyers' contest.

A Charlotte, NC man purchased a box of very rare and expensive cigars then insured them against fire, among other things. Within a month, having smoked his entire stockpile of these great cigars and without having even made his first premium payment on the policy, he filed claim against the company.


He stated that the cigars were lost ‘in a series of small fires’. The company refused to pay, saying that the man had consumed the cigars in the normal fashion. 

He sued and won! The judge agreed with the company that the claim was frivolous but stated that, nevertheless, the insured held a policy from the company with a guarantee it would cover his cigars against fire.

The judge said that the company had not stated what is considered to be ‘unacceptable fire’ and was obligated to pay the claim.

Rather than endure a lengthy and costly appeal process, the company accepted the ruling and paid $15,000 to the man for his loss of the rare cigars lost in the ‘fires’.

After he cashed the check, the company had him arrested on 24 counts of arson. With his claim and testimony from the previous case being used against him, he was convicted of intentionally burning his insured property and was sentenced to 24 months in jail and a $24,000 fine.

I’m sure you will use coverage much more wisely than this. It’s a complicated business and as always, with important financial matters, consult with your professional advisers and insurance broker before making any decisions.