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Self Insuring Question
Old 07-24-2021, 05:22 PM   #1
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Self Insuring Question

I understand and realize the utility of carrying homeowners, auto and personal liability insurance up to a point. But at what point would you consider self insuring your home and auto and go with just liability insurance. Maybe the cheap SOB in me but I've always felt insurance was like paying the mafia protection money. As far as life insurance, I only ever carried term and dropped that policy long ago when I figured the DW could easily maintain her standard of living long past the time that even she would pass. Just fishing here for some discussion and thoughts, thanks in advance for any and all input.
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Old 07-24-2021, 05:33 PM   #2
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I am always happy to self-insure small stuff - such as warranties on appliances. It's just not worth the hassle. For example, last time we bought an appliance from Sears, the ratings were bad for all brands, so we bought the warranty. The warranty service (as it did break twice) has been an absolute joke. Takes a week to get an appointment, multiple no shows, show up at 9PM Saturday night, etc.... SOOOO much easier to just call an appliance person and pay them. Also, car and home insurance you never want to make a claim unless it's big as they just raise your rates. Anyway, long answer to say I want insurance for huge things so we have a few million umbrella but have the highest deductibles we can for whatever coverage we do have.
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Old 07-24-2021, 05:52 PM   #3
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We self insure small stuff, but the house and car we carry insurance beyond liability.

We do have a 23 yr old car that is worth $2K , I dropped the collision insurance as they would right it off in any accident.

I know the odds are my house will not burn down, but the ~$800/yr estimated part that covers that is small compared to coming up with $300K to build a new one.

The difference between insurance and protection, is that with protection if you switch or don't pay, the gang/organization will burn your house down.. Insurance companies don't bother.

I've never had a house burn down, but I've been in a house that caught fire. My neighbor at one place set her kitchen on fire and burned herself.
Here my neighbor behind me set his house on fire by accident while BBQ'ing, we all ran over to put it out before it destroyed more than his deck and back wall.

So while the odds are, I'll never have a fire, the cost of such an event is too great to skip the insurance.
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Old 07-24-2021, 06:22 PM   #4
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Consider the highest deductible you can go with on your house. I don't think I want to totally self-insure my house. See what you can save by dropping collision on your car.
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Old 07-24-2021, 06:30 PM   #5
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I probably should have dropped Comp and Collision on my last car- when the transmission died and I donated it the charity got $1,600 for it. Be aware, though, that your liability coverage may cost more. When I dropped physical damage on an old car years ago, my liability premiums went up- supposedly because I was deemed a higher-risk driver. Made no sense to me since you'd think those who had to pay to repair or replace their cars after an accident would be more careful but what do I know? I'm only an actuary. Note also that if an uninsured driver plows into you, you probably cannot buy Uninsured/Underinsured Motorists coverage if you don't have Liability. Just 2 months ago someone with no morals grazed the side of my car when it was parked out in the street across from DS' house, and left no note. $3,500 worth of damage plus the cost of a rental car while it was in the shop. UM covered all but a $500 deductible.

In theory, yeah, I could absorb the cost of replacing the house if it were blown away in a tornado, but including the cost of finding another place to live and replacing al the contents (but minus the cost of the land) might be 15% of my assets. Don't want to risk it.

My parents did drop windstorm coverage on their home in North Myrtle Beach. They'd paid cash for it so no bank to require the coverage, and they figured the land was worth more than the house. Dad sold it after Mom died with no hurricanes in the interim, so that was a good bet.
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Old 07-24-2021, 06:50 PM   #6
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I would say you are self insured when you have enough money and can set the house on fire and then go buying another house the next day plus the rental expense you need before moving in.
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Old 07-24-2021, 07:06 PM   #7
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Collision is expensive and if you're not in the habit of running into things I would drop at 5 or 6 model years.

A snake bit co-worker of mine had no home owners insurance because he said "I paid cash, I don't need it".

Well he had a well and a pump and he left and the pipes froze and split. When they thawed the pump filled the house with water until a neighbor called and told my snake bit friend. House flooded, black mold everywhere. Done.

But I don't need homeowners insurance because I paid cash. Yeah he was a frugal guy.
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Old 07-24-2021, 07:17 PM   #8
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But I don't need homeowners insurance because I paid cash. Yeah he was a frugal guy.
That's not frugal. That's downright cheap. That feller wasn't very skilled at risk assessment.

Like most others here, I don't insure the small items. To not insure a house worth a few hundred thousand, I'd have to have tens of millions of dollars in my portfolio to consider the risk worth it. However, if I had that big a portfolio, the cost of insurance would be peanuts, so I'd still get it.
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Old 07-24-2021, 09:53 PM   #9
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That's not frugal. That's downright cheap. That feller wasn't very skilled at risk assessment.

Like most others here, I don't insure the small items. To not insure a house worth a few hundred thousand, I'd have to have tens of millions of dollars in my portfolio to consider the risk worth it. However, if I had that big a portfolio, the cost of insurance would be peanuts, so I'd still get it.
But even if someone felt they could cover the total loss of a house out of their assets, you probably wouldn't be able to get extended liability insurance w/o that coverage as well (I don't know, I never tried). But I don't think it's like dropping collision on an 8 yo car. I suspect they want you to have full coverage on your house if they are going to offer a $1M umbrella.

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Old 07-24-2021, 10:25 PM   #10
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He was "unusual", to say the least. Frugal? He used to go to the park on Sunday and collect aluminum cans from the garbage to recycle. In Danville CA. Drove there in a company car.
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Old 07-24-2021, 11:34 PM   #11
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He was "unusual", to say the least. Frugal? He used to go to the park on Sunday and collect aluminum cans from the garbage to recycle. In Danville CA. Drove there in a company car.
Wow. Well, I hope he was happy, though it doesn't sound like it. Sounds as if he was in the grip of something larger than himself.

Definitely not a blow the dough kinda guy
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Old 07-25-2021, 01:45 AM   #12
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Call me too conservative but I sleep better at night carrying replacement cost insurance on our properties and as well as significant liability coverage. We still have collision coverage on our 2007 cars. I guess we could reconsider that?
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Old 07-25-2021, 05:55 AM   #13
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You pay less for collision on older cars. I checked my coverage on my 2014 Subaru. $102/yr for collision with a $1000 deductible. I'm keeping it, because sometimes in the winter I might get caught out in a winter storm, or want to get out for skiing even if road conditions aren't great. I had dropped coverage on my previous car and totaled it when a storm barely beat me home.
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Old 07-25-2021, 06:32 AM   #14
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But even if someone felt they could cover the total loss of a house out of their assets, you probably wouldn't be able to get extended liability insurance w/o that coverage as well (I don't know, I never tried). But I don't think it's like dropping collision on an 8 yo car. I suspect they want you to have full coverage on your house if they are going to offer a $1M umbrella.
I agree with that. I never saw a standalone Homeowners Liability policy and if you want to buy Umbrella liability you have to have pretty substantial underlying liability coverage. Mine requires $500K. I suppose you could agree to self-insure that amount if the umbrella insurer were willing.
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Old 07-25-2021, 10:34 AM   #15
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Maybe the cheap SOB in me but I've always felt insurance was like paying the mafia protection money.
When I see folks posting about self-insuring the first thing that always comes to mind is "Penny wise, pound foolish", especially when comes to homeowners.
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Old 07-25-2021, 10:48 AM   #16
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When I see folks posting about self-insuring the first thing that always comes to mind is "Penny wise, pound foolish", especially when comes to homeowners.
Probably a fair assessment.
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Old 07-25-2021, 02:17 PM   #17
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I understand and realize the utility of carrying homeowners, auto and personal liability insurance up to a point. But at what point would you consider self insuring your home and auto and go with just liability insurance.
...
In terms of homeowner insurance, I carry ~$17,000 deductible as I don't want to subsidize lost jewelry in nursing homes, replace older house roofs due to hail damage, etc. (Sorry folks, I'm just being honest ). I also likely don't have quite enough coverage for full replacement cost on my house either. Neither of these events ($17,000, or maybe $50,000 lack of coverage) would effect my life style.

When I was w*rking the company paid more and more of your disability premium based on your years of service, so once I was was financial set (~50 years old), I dropped my portion of short/long term disability insurance completely. I hated subsidizing other folks again.

In terms of auto insurance, I could self insure without effecting my life style with a wreck, but it just seems nice to have someone in my corner to deal with other folks involved in the accident.
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Old 07-25-2021, 02:44 PM   #18
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Self-insurance is not the same as no insurance. Self insurance recognizes loss is possible, funds are provisioned or set aside to cover expected loss, and the expected cost of impact of the loss is in the same range as the cost of insurance over time.

No insurance is just taking a financial risk that there will not be meaningful loss. It’s more like a wager. Odds are favorable there will not be a major loss, but the impact of a loss is considerable.

Self-insure makes sense for things like dental insurance. Ceilings in total coverage limit the usefulness of the insurance. Homeowners insurance costs much less, even 30 years of premiums would probably not be enough to cover one major incident.

RunningBum’s advice makes sense and is what we do, which is get the highest deductible coverage we can to minimize the policy cost.
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Old 07-25-2021, 03:19 PM   #19
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I thought about this too some time back. Then my home, cars, well; everything I own other than the clothes I was wearing, burned up in a California wildland fire. I'll never look at insurance the same way again. An insurance policy pays for more than just the value of your home. The clean up alone cost me over $100,000 in order to even start rebuilding. If I didn't do it, the government was willing to step in and do it, then bill me for it. The house was on a hillside. The clean up so destabilized the soil, I had to pay for an engineer and soil compaction to stabilize the soil as well or pay for any sediment runoff into any local streams and the necessary work to evaluate if my run off was indeed damaging the water ways.
Then there's the 'loss-of-use' where the insurance policy covers the rent of everything from house to all it's furnishings; forks, towels, beds and bedding, you name it. If it was in the house or of the house, they paid for the loss of use until those things are replaced. This cost is above the value of the house and the value for clean up, permits, etc. and had no dollar limit, only a 2 year time limit. They even paid me for costs above and beyond my normal everyday expenses. For example, we had to dine out instead of cooking our own meals until set up in the rental. The difference between our normal grocery bill and our cost for food is covered under 'loss of use'.

I'd have to say that for every $100,000 of home market value, the insurance company paid us $200,000. Personal property alone is 70% of the home value. Landscape, property improvements such as septic, fencing, pavement/driveway/sidewalk, any barn, outbuildings, etc are all covered as percentages of the home's value. I owned a lot of collectables all covered.

Please really look into what it would cost to replace your home, not what your home is worth. They are two totally different things when you are considering self insuring. And for those who are wondering how much they should insure for, ask a contractor what it would cost to demolish your existing home and replace it down to the scorched earth. Then add 70% for the possessions and land improvements and you might break even on a total disaster claim.
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Old 07-25-2021, 03:48 PM   #20
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This is an interesting discussion. Could I self-insure for property loss - yes. Would I - no. Just not worth the risk. Either way I would need liability coverage however as I could not self-insure for that. We have the basics - auto, home & health insurance. We dropped life insurance years ago.

I also have not purchased any product warranties figuring I was self-insuring for those. I had a TV quit working about a week after warranty was done. Red circle of death they called it. Company would not go one day past warranty period. It’s worked out for the better as I haven’t needed any other extended warranties and have saved hundreds or maybe even thousands by not having purchased them.
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