Let me be upfront before anything else: I am an appointed adviser for Guardian Group, and if you buy a policy through me I am paid for it. You should read everything below with that in mind — and you should also notice that a good part of it is me telling you when not to buy. Both things are true, and I would rather you knew the first before you weighed the second.
Now, let me concede the skeptic's point, because it is a good one.
Insurance companies are profitable. They employ actuaries whose entire job is to ensure that, across the whole book of policies, premiums collected exceed claims paid plus expenses. That is not a conspiracy; it is how the business must work if the company is to still exist when you claim. But it does mean one thing is true by construction: on average, policyholders get back less than they pay in.
So the skeptic asks the obvious question. If the expected value is negative, why would a rational person buy?
The answer is not that the skeptic has the arithmetic wrong. It is that expected value is the wrong tool for this particular problem.
Why expected value is the wrong test
Expected value assumes all outcomes are survivable and you can play the game many times. Neither is true here.
Consider a household with TT$3 million of financial need if the earner dies. Suppose the probability of that happening during the twenty years the family depends on that income is 4%. The "expected loss" is TT$120,000. If the premium over twenty years totals TT$150,000, the skeptic says: you paid TT$150,000 for TT$120,000 of expected value. Bad deal.
But the family cannot experience the expected value. They experience one of two outcomes. In 96% of futures they lose TT$150,000 over twenty years — an annoyance. In 4% of futures they lose TT$3,000,000 — a catastrophe that reshapes two children's lives.
Insurance converts a small chance of ruin into a certain, small, budgetable cost. You are not buying an investment. You are buying the removal of a tail. Paying slightly more than fair value for that is entirely rational, and it is the same reason you would not accept a bet that had a 4% chance of taking your house even if the odds were technically in your favour.
When insurance genuinely is a waste of money
Here is where I part company with most people writing about this, because the honest answer includes real cases where the skeptic is right.
1. When nobody would suffer financially
A single person with no dependants, no co-signed debt and no one relying on their income does not need life insurance. They may want a small policy for funeral costs. They do not need TT$1 million of cover, and anyone selling it to them is selling a product, not a solution.
2. When you could absorb the loss without difficulty
Insurance is for losses you cannot afford. A five-year-old vehicle worth TT$35,000, owned outright by someone with TT$300,000 in accessible savings, does not need comprehensive cover — third-party is the legal requirement and the rational choice. Insuring things you could simply replace is paying a company to hold your money and give some of it back.
3. Extended warranties and small-item cover
Appliance warranties, phone insurance, gadget cover. The claim amounts are small, the exclusions are wide and the loading is heavy. Self-insure.
4. Permanent cover bought as an investment, without ever testing it
This is the big one, and it is where most of the resentment toward the industry originates.
Whole life and other permanent policies bundle protection with savings. That bundling is not inherently wrong — Guardian's Xpress Life, for instance, provides cover to age 100 and builds a cash value that becomes accessible in the 21st policy year, which is a coherent product for someone who wants lifetime cover and will genuinely hold it for decades. What is wrong is buying it as an investment without ever comparing it to the alternative.
The comparison is simple and you are entitled to insist on it: what would the same sum assured cost as Term Life, and what would the monthly difference accumulate to if invested separately? Sometimes the permanent policy still wins — where the need is genuinely lifelong, or where the discipline of a fixed premium is worth something to you. Sometimes it does not. Either way it is a claim to be tested, not accepted, and if I recommend a permanent policy to you I should be able to show you why it beat the alternative.
5. Cover you already have
Duplicate cover pays nothing extra. Credit card travel insurance, employer group life, mortgage protection, existing health cover through a spouse — people routinely pay twice because nobody ever listed what they already hold.
When insurance is unambiguously worth it
The test is simple and it has two parts. Buy insurance when the loss would be financially catastrophic and the probability is low enough that the premium is small relative to the loss.
That gives a short list:
- Life cover where dependants rely on your income
- Critical illness cover, because a diagnosis stops income and raises expenses at the same time
- Health cover, because a serious medical event can cost more than most people's total savings
- Motor third-party liability — legally required, and the potential liability for injuring someone is effectively unlimited
- Property cover on a home you could not simply rebuild from savings
- Business liability and key person cover where one event could close the business
Notice what these have in common: every one of them protects against something that could not be absorbed. Notice also what is missing: nothing on that list is bought for its returns.
The way to think about the premium
Stop thinking of the premium as money spent hoping to get it back. Think of it as the price of removing a specific risk from your life for a specific period.
You do not resent your motor premium at the end of a year in which you did not crash. You had a year of not worrying about crashing. That is the product. Life and critical illness cover work identically — you buy years in which a diagnosis would be a medical problem rather than simultaneously a medical and financial one.
Four questions that settle it
- If this event happened tomorrow, who suffers financially, and how badly? If the honest answer is "nobody much", do not buy.
- Could I absorb this loss from savings without changing how I live? If yes, self-insure.
- Am I already covered elsewhere? Check the employer scheme, the mortgage policy, the spouse's plan.
- Is this policy protection, savings, or both? If both, ask for the cost of each separately. A reluctance to answer that question tells you a great deal.
The honest summary
Insurance is a bad investment and an excellent risk transfer. Buy it for the second reason and it is one of the most efficient purchases available to a household. Buy it for the first and you will probably be disappointed, and you will have earned the right to be.
Most people in Trinidad and Tobago are simultaneously over-insured on things they could replace and dangerously under-insured on the one event that would change everything. Correcting both usually costs less than they are paying today.
Where I would and would not place a Guardian policy
I place business with Guardian Group, so here is the honest version of when I would and would not.
I would recommend Guardian Term Life or Xpress Life where people genuinely depend on your income, and the Phoenix Plan for critical illness — because a diagnosis stops income and raises expenses at the same time, and nothing else in your financial life covers that.
I would not sell you a large policy if you have no dependants, no co-signed debt and nobody relying on you. I would not recommend adding cover you already hold through an employer group life scheme without checking it first. And I would not recommend a permanent policy over term cover unless I could show you the comparison and explain why it won.
If the honest answer for your situation is "you don't need this", that is the answer you will get.
Noble Accounting & Insurance is an appointed adviser for Guardian Group (Guardian Life of The Caribbean Limited and Guardian General Insurance Limited). Where an article recommends an insurance or annuity solution, that recommendation will be a Guardian Group product, and we are remunerated by Guardian Group when business is placed. Product features described here are drawn from Guardian Group's published material; full terms, benefits, exclusions and premiums are set out in the policy documents and your personal illustration.
General information only. This article sets out general information about accounting, taxation and insurance matters in Trinidad and Tobago as understood at the date of publication. Rates, thresholds, product features, forms and filing procedures change, and the right course depends on your particular circumstances. It is not accounting, tax, legal or financial advice and should not be relied on as a substitute for professional consultation. Please confirm current requirements with the Inland Revenue Division, the National Insurance Board, the Central Bank of Trinidad and Tobago or your insurer as applicable — or speak with us before acting.