Have you ever wondered how insurance companies determine the rates for their policies? Well, I have. One day I had nothing better to do, so I decided to find out the secret behind the determination of insurance rates. What was I thinking? Let me just tell you that it is not the simplest equation in the world. If fact, it is so complicated that they have a person called an actuary to carry out this task. Just gaining an underst anding of what an actuary is can be complicated.

It’s like anything associated with actuaries is kept in top secret files by the CIA. After some consistent and diligent research, I came up with nothing. This is what I can tell you about an actuary. They are the people who get paid to make a whole lot of numbers make sense so that insurance companies can assume risks in a manner that allows them to effectively cover legitimate claims while remaining financially viable. That’s the simplified version.

I know what you are thinking right now; I have not told you much. That is because I did not find out much. The job of an actuary is obviously very complicated and very stressful. I know this because that what everyone keeps telling me to avoid telling me what an actuary does. So, since I can’t make any progress in this area, I will simply express my opinion on the matter.

Whether you purchase home owner’s insurance or life insurance, whether you insure your car or your boat, there is some guy in a bow tie (nothing against bow ties) on the 66^th floor of a skyscraper in some metropolitan location, with a pencil with no eraser. Why does he not have an eraser on his pencil you ask? It is not because he used it, it is because he doesn’t need it. Yes, he is that good.

I was not able to learn much about actuaries, but the one thing I did learn was that they are exceptionally good with numbers. The actuary is the guy in your calculus class that never took out his calculator; he was never shaken by the most astronomical algebraic equation. The actuary is the guy that looks at structural engineers with an aura of superiority. This guy is never late anywhere because is able to take into account all variables including unknown possibilities and risks and accurately calculate to the second his arrival time. He synchronizes his watch three times a day.

Why am I going on and on about this guy who no one ever meets. Honestly, I don’t like the fact of not being able to learn what I set out to learn; just kidding. Actually, an actuary is a highly skilled person who uses a very strict formula that considers numerous variables that are associated with the assumed risk that is taken when an insurance company issues a policy. Risk factors are considered from a number of different angles. The key is to create a situation in which the insured receives a policy that will meet their specific needs with a premium that is fair, and hopefully, affordable. This all has to be done while insuring that the company is taking in enough money to pay out any claims.

I tip my hat to the actuaries that get it right, because the world would be in one big mess if you forgot to carry the 1.

Jennifer walked into her best friend’s kitchen and stopped. “Carrie, what are you doing?”

Snap. Snap. “I’m taking pictures,” she replied.

“I can see that. Why are you taking pictures of your jewelry?”

“Oh, I’m taking pictures of everything. I’m backing up my computer and all my financial records too.”

“Obsessed much?” Jennifer said laughing. She grabbed a mug of coffee and sat at the table. “So, spill. Why are you taking pictures and backing everything up.”

Carrie h anded her a cookie and sat down with her own cup of coffee. “Well, I just got an insurance rider for this jewelry and Doug’s collection of Civil War Memorabilia. I want to document all of our important items and even the not so important ones, like the televisions and the computer itself. I’m saving it all to a flash drive and locking in my fireproof/waterproof safe. It’s for my homeowners insurance.”

“Yep, you’re obsessed. I can’t imagine an agent told you to do that.”

“No, but he said it was a good idea. It’s important to document the serial numbers so in the event of a tragedy they can be more easily replaced, except for the jewelry and the collection of course. How will they know exactly what you have if you don’t have a record of it to show them? It’s also helpful if you get robbed. You’ll have a list of the items taken for the police.”

“You’ve really given this a lot of thought haven’t you?”

“Of course I have. I worry all the time about the ‘what if’. What if something happens to your house? Don’t you have that collection of first edition books? Are they worth more than the st andard replacement coverage you have for your belongings? You really should think about a separate rider for those you know.”

“I’m sure our coverage is just fine,” Jennifer assured her.

“Are you really? Have you read the policy?”

“No, why would I?”

“Jennifer, do you even know if you have coverage for the rising cost of building materials, or just the replacement value of your house when you bought it?

“Oh, I’m sure we do. I’ll ask Bob when he gets home.”

“I get a new copy of my policy every year and I read it to see if things are covered that we no longer have or need coverage for things that aren’t covered. You should do that too. Does Bob do that?”

“I don’t know,” Jennifer answered. “I should know it too though, in case something happens.”

“Now that’s a good idea. Oh, I need to get my gr andmother’s recipes copied onto the computer so I don’t lose those either.”

You don’t have to be as obsessed as Carrie, but knowing what is covered and what is not is important. Ask your broker for a copy of your policy if you don’t have one. Changes may have been made you need to know about. Ask if you have enough coverage and how you can get extra if needed. You don’t want to find you’re underinsured when you are already stressed by events.