"Insurance: How to Buy and Why It Matters — Claim Payments and Big Payouts

Published Date: 09/10/2024

Insurance 101: How to Buy It, Why It Matters, and Proof That It Pays

When it comes to insurance, most people fall into one of two camps: those who see it as a necessary expense, and those who see it as a waste until disaster strikes. Yet the truth, as Karl Susman explains in a recent Insurance Hour episode, lies somewhere in between.

Insurance isn’t just about protection — it’s about understanding how, when, and from whom to buy it. And, perhaps most importantly, it’s about knowing that when catastrophe does strike, the system actually works.

The Many Ways to Buy Insurance

Before diving into claims and payouts, Susman began with a fundamental question: How should you buy insurance?

There’s no single answer, because consumers today have multiple pathways — each with its own advantages, limitations, and implications for service quality.

1. Through an Independent Broker

Independent brokers represent multiple insurance carriers, giving consumers access to a variety of options. They’re licensed professionals who can tailor coverage to individual needs, shopping across different insurers to find the right balance between cost and protection.

“Brokers are like doctors,” Susman explained. “You wouldn’t just go get an x-ray yourself — you go to a doctor who knows what kind of x-ray you need. It’s the same idea with insurance.”

2. Through a Captive Agent

Captive agents sell for one specific company — think State Farm or Allstate. They understand that carrier’s products deeply and can sometimes offer discounts or personalized service, but their range of options is limited.

3. Through a Direct-to-Consumer Channel

In recent decades, insurers have expanded their direct-to-consumer sales — allowing people to buy policies online, over the phone, or even through the mail.

Yes, the mail.

Susman shared that one of the earliest “direct” insurance models began through postal offers — customers received a quote, mailed back a check, and voilà, they were insured.

“The problem,” he noted, “was that people often didn’t realize what coverage they were actually getting — or how little of it they had.”

Today’s online systems are far more sophisticated, but Susman believes one thing hasn’t changed: the gap between convenience and comprehension.

“Consumers who want to click a few buttons and buy online are a different type of buyer than someone who wants professional advice,” he said. “Both models have their place — but if you want deep guidance, talk to a licensed broker or agent.”

Why Talking to an Expert Still Matters

Insurance has always been complex — and it’s only getting more so. Between new coverage exclusions, climate-driven risks, and intricate policy language, even well-informed buyers can miss key details.

“Agents and brokers spend years learning this stuff,” Susman said. “They’re licensed for a reason. They understand the nuances that most people don’t — and that can save you thousands down the line.”

This isn’t a jab at digital insurance platforms, he clarified, but rather a call for balance. Online tools are great for quick quotes and renewals, but they can’t always explain why one policy fits your risk profile better than another.

That’s why Susman advises consumers to think of insurance the same way they would medical care:

“You can Google symptoms all day long, but when it comes to treatment, you still go see a doctor.”

Does Insurance Really Pay When It Matters?

One of the biggest misconceptions about insurance — and a common frustration among consumers — is the belief that companies don’t pay claims.

Susman tackled that myth head-on.

“Do insurance companies pay claims? Yes. Every day. On everything from fender benders to billion-dollar disasters.”

He backed this up with hard data from some of the largest claim payouts in modern history, proving that the industry, for all its flaws, fulfills its fundamental promise — especially when it counts most.

Here are a few staggering examples Susman cited:

EventYearEstimated Claims Paid9/11 Terrorist Attacks (U.S.)2001$40 billionHurricane Katrina (U.S.)2005$41 billionTohoku Earthquake & Tsunami (Japan)2011$35 billionHurricane Sandy (U.S.)2012$30 billionCalifornia Wildfires2017–2018$20+ billionHurricane Harvey (U.S.)2017$20 billionHurricane Maria (U.S. Territories)2017$30 billionNorthridge Earthquake (California)1994$20 billionCOVID-19 Pandemic2020Hundreds of billions (globally)

“That’s not just a few checks written,” Susman said. “That’s an entire industry mobilizing to help economies recover.”

The 9/11 insurance payouts alone helped rebuild Lower Manhattan. The wildfire payouts in 2018 kept thousands of Californians from financial ruin. And even during COVID-19, insurers worldwide paid hundreds of billions in business interruption, life, and health claims.

“People like to criticize insurance companies,” he said, “but when you look at the numbers, they do pay. The system works — even if sometimes it works slower than we’d like.”

Big Payouts, Small Promises: The Everyday Claims

While billion-dollar disasters make headlines, most insurance claims are much smaller — and much more personal.

Auto accidents, kitchen fires, burst pipes, slip-and-falls — these everyday losses are where most consumers actually interact with the system. And they matter just as much.

“It’s easy to focus on the big events,” Susman said, “but insurance companies pay millions of smaller claims every year. Those are the ones that keep families afloat.”

Whether it’s replacing a totaled car, rebuilding a home, or covering legal fees from an accident, insurance remains the backbone of financial resilience.

The Famous “Claims Quote” You’ll Never Forget

Before cutting to break, Susman teased what he called his “famous quote” about insurance claims — a rule of thumb that sums up the entire philosophy of insurance in one line.

He didn’t reveal it immediately, choosing instead to make listeners wait until after the break — a move that felt half-radio showmanship, half genuine anticipation.

But for longtime listeners, the message was familiar: insurance is a partnership of trust and preparation.

You pay premiums not just for a contract, but for peace of mind. And while no system is perfect, understanding how it works — and how to navigate it — can make all the difference when it’s your turn to file a claim.

Lessons for Consumers: How to Buy Smart

Susman offered practical guidance for everyday consumers navigating a crowded marketplace:

1. Know What You’re Buying

Don’t assume every policy covers every risk. Read the exclusions. Ask questions. If you’re unsure, talk to your agent — not social media.

2. Work With a Licensed Professional

A good agent or broker does more than sell policies — they advocate for you during the claims process.

3. Compare Apples to Apples

Two quotes with the same price don’t always offer the same protection. Compare limits, deductibles, and endorsements before deciding.

4. Keep Records

Document everything — communications, receipts, and correspondence. If a claim arises, evidence speeds up resolution.

5. Understand the Value of Service

Cheap insurance isn’t always better. The real test of value comes when you need to file a claim, not when you pay your premium.

“You don’t want to find out the difference between good insurance and cheap insurance after the loss,” Susman warned.

Insurance as a Social Safety Net

Beyond individual protection, insurance serves a broader social and economic function. It allows businesses to reopen after disasters, employees to stay on payroll, and entire regions to recover.

“Without insurance,” Susman said, “you’d have no rebuilding, no recovery, no resilience. It’s not just personal — it’s societal.”

Indeed, insurance payouts after California’s wildfires or Florida’s hurricanes often outpace federal aid. The private market, for all its profit motives, remains one of the few mechanisms capable of distributing massive financial relief efficiently.

Why This Matters Now

In California and across the country, the insurance industry is undergoing a profound shift. Rising catastrophe losses, stricter regulations, and reinsurance costs are testing the limits of affordability and availability.

But despite those pressures, Susman remains confident in the system’s resilience — and its ability to evolve.

“Insurance companies aren’t villains,” he said. “They’re trying to balance risk with reality. The key is making sure the system stays sustainable — for them and for us.”

That sustainability, he argues, depends on informed consumers who understand what they’re buying and why.

Final Thoughts: Insurance Works — When You Work With It

Susman closed the show with a reminder that resonates far beyond the world of premiums and claims:

“Insurance is complicated, but it’s not mysterious. The more you know, the better protected you are.”

In other words, don’t just buy insurance — engage with it. Learn the basics. Ask questions. Build a relationship with your agent. And when you file a claim, approach it with patience, documentation, and clarity.

Because while the system isn’t perfect, history — from 9/11 to California’s wildfires — proves that it works.

Insurance pays.
Insurance protects.
Insurance matters.

And as Susman would say, “That’s why we do this show — to help you understand not just what to buy, but why it matters.”