For decades, the insurance industry has had an image problem. Many see insurance as a way for insurers to simply rip people off by collecting premiums but not paying out for claims. Insurers are seen as having deep pockets that should pay for everything, isn't that what it's for? But herein lies the problem. There are many factors in insurance that consumers don't understand or take into consideration.
First, insurance is not a social service. It is a for-profit industry providing a particular service to those who buy a policy. The policy is designed to provide coverage for certain losses that can be predicted and rated for. The collapse of the Surfside condominium highlights this; the building collapsed, and many figure that's what insurance is for. But in order to develop a premium for any type of loss, there has to be enough of those losses for carriers to look at the costs of those losses, make predictions on the possible number of future losses and predicted costs of those losses, so premiums can be developed that will actually allow the carriers to accumulate enough funds to provide coverage when that event does happen.
Buildings in general don't just collapse. They may collapse due to an earthquake, fire, tornado or other natural disaster but they generally don't just fall down. If the building was constructed poorly, then there is the issue of liability on the builder which might be covered, but the policy for the building itself would not cover such deficiencies. Wear and tear and maintenance issues are not covered by insurance.
When determining what to provide coverage for in any policy one of the things a carrier will look for is whether or not the loss was preventable. Could the insured have taken steps to prevent the loss, and should he? Insurance does not pay for maintenance issues; if your roof is forty years old and leaking, then it is your responsibility to replace it since it has outlived its usefulness. An insurance policy is not a maintenance plan. So insurance will not pay for a host of things that fall into this type of loss; wear and tear, deterioration, maintenance, corrosion, rust, and other things that can be expected to occur over time since nothing lasts forever.
Insureds are expected to obey traffic laws and drive reasonably, maintain their personal property, follow safety procedures when operating machinery, and other actions. If an insured can avoid a loss by behaving in a certain way, he is expected to do so. Reckless or irresponsible behavior is also not going to be covered by insurance. Intentional acts to destroy property or harm people will not be covered.
Not everything can be covered by insurance; some things aren't predictable, some things are unavoidable and are bound to happen over time, other things are a result of neglect or direct acts of an insured, and other things happen often enough and cause enough damage that the premiums would be unaffordable for those who need the coverage the most, for example flood insurance for those living in oceanfront properties.
Many insureds look at cost first when buying insurance and don't look at coverage; this is a large mistake. What many insureds fail to take into account is how long it would take them to accumulate the amount of money to pay for the loss from the savings in premium. For example, Joe buys a homeowners policy with lesser coverage for $1200 a year because he thinks paying $1800 is far too much and doesn't think he needs the endorsement for water backup. He listens to the insurance commercials that say buy only what you need. Joe is saving $600 a year. Joe has a $10,000 water loss that is not covered under his policy but would have been covered under the more expensive policy. If Joe put that $600 savings away every year and he didn't have a water loss for sixteen years, then his savings would pay for the water loss. However, we know this is not what happens, the money saved in premium gets used for other things and is not saved for the losses they did not buy coverage for.
Another image issue the industry has is that insurance is dry and boring. Therefore insureds are reluctant to even try to read their insurance policies since they assume they are boring and difficult to understand. Unfortunately, those same insureds also don't want to make time to sit down with their agent and review what exactly is and isn't covered by their policy. Some agents may also take the easy way out and tell insureds that they're covered for most catastrophic losses. With insurance however details matter, and vague statements let the insureds make false assumptions about coverage. It's important for the industry to do its best to educate the consumer on how insurance works, why everything isn't covered, and why having enough coverage is important.
How settlement is determined is another important thing insureds may not understand. They may expect replacement cost when the policy only provides coverage for actual cash value; that should be explained to insureds to avoid misunderstandings in event of a loss. Some things can be changed to replacement cost by endorsement, and that option should always be discussed.
A brief explanation of the structure of a policy and that it includes definitions, insuring agreements, conditions and exclusions, and how those sections work, is a good start. A few minutes explaining that insurance doesn't cover wear over time, neglect, or maintenance items is helpful. An insured's introduction to an insurance policy is when he buys one; unless we as an industry take the time to explain to insureds what they're buying and how it works, misunderstandings and negative opinions of the industry will continue.