Drop or reduce insurances?

[pedorrero]

Forgive me if I brought this up recently (I think it was on TMF).

I am considering reducing and/or dropping certain types of insurance.

Health: I pay $450/mo to BCBSFL. I applied for a reduction which was denied. As a student I am eligible for a policy (also BCBSFL) with less, but "maybe" not unreasonable coverage, at about 1/4 the price.

Homeowner's: I am State Farm client. They will be pulling out of Florida in next year or two. My current $800/year is virtually guaranteed to increase. How much I don't know. NB: I already have maxed out the deductibles (at $10K).

Auto: I pay around $800/year. With a pretty clean record. Again, liability only, high deductibles. Tried shopping for competing quotes, and I am close to paying the lowest.

OK, so what are the options? Here are some:

Health; already noted. I am in generally good health. i would probably feel comfortable taking the student coverage, although less yearly cap (around $200K). Important note: as a group policy, I could re-qualify later for the guaranteed issue (expensive) policy I've been on for five years. Did the same in 2003, could do it again.

Homeowner's; at what point does it become more worthwhile to NOT pay for insurance? I'm not going to pay $2,000 year to insure a $130K (optimistic!) place. There are some options to reduce the amount of coverage, but limited. State law dictates the coverages and you can't just pick and choose. Important; why not drop liability coverage? As a homestead, my home is untouchable by most creditors, even in a bankruptcy. Since most of my wealth is in my home, what am I paying to insure with liability coverage? Let them take my stock account and personal goods, worth maybe $15,000 on a good day (some of these are exempted too.)

Auto: a tricky one. In FL, as perhaps other states, you can skip insurance but you need a certificate of self-insurance. i have not yet been able to track down the costs or troubles, other than you need to gurantee a net worth of $40K (perhaps posted as bond?). In VA there was an annual cost of around $500, which was close to what a clean driver would pay for his insurance there. Assuming I can legally drop the insurance, again my liability is quite limited. if they want my stocks and furniture, sue away.

NB: In FL, many types of property and assets, even income, are exempt. If I had a normal retirement plan, exempt. A family trust? Not attachable as an asset.

What I'd really like is to run my ideas by an attorney. What kind? Bankruptcy? Asset protection? Any ideas helpful. Thanks.

 

[Sarah in SC]

I am pretty cheap about these things, but I can't really find a place to cut--a lot of it has to do with where you live.

My auto rates are a good bit cheaper, for two people and several cars. I thought SC was high! Liability only, of course. Have you gotten a quote from Progressive? Their rates are mostly based on credit scores, so they can be a lot cheaper if yours is good.

Once you've maxed out those deductibles, it gets kinda scary to drop H/O coverage. You can be hit with some penalties if your coverage drops below 80% of the value and you make a claim.

The only place I might be willing to look is that health coverage you mentioned. If you feel pretty good about it, I'd go with the student coverage. What about an HSA high deductible plan?

 

[samclem]

Remember that one of the things you are buying with liability coverage (home and auto) is legal protection. When you buy these policies you have an automatic partner (the insurance company) if you are sued. They have good lawyers, deep pockets, lots of experience, and lots of motivation to fight hard. There are lots of scam artists out there (esp in FL) and as the economy gets worse the problems will only increase. If you were a victim of one of those "cut-him-off-and let-him-rear-end-us" artists and were sued for 100K, it could costs tens of thousands to defend yourself.

Yes, you shouldn't buy more insurance than you need, but I don't think I'd consider self-insuring for some of these risks.

 

[deepc]

A recurring theme in your post seems to be that creditors or claimants would not be able to touch your assets in case of a claim. So, what if through no fault of your own or negligence someone were to injure themselves on your property? Or you should negligently run into someone with your car? And cause massive health care costs, lost income, etc etc.

Do you not believe that you have a moral responsibility to pay for the damages?

You might be better off doing without the car and/or home if you cannot afford to protect yourself and others against unanticipated accidents. Renter's insurance is very inexpensive and covers liability as well as loss, and you would have a hard time causing a great deal of damage on a bicycle or the bus.

As far as health goes, same thing. Until we have an acceptable universal health care system of some sort, you have a moral obligation to cover your own costs. I work in a hospital ER where a large percentage of non-paying patients come for routine care. Their costs are passed on to all who use the health care system. Again, unless your morals allow you to pass your own costs onto someone else, you have an obligation to pay your own way.

 

[73ss454]

On the auto ins take a look at getting rid of the uninsured motorist. This coverage only covers about 10K medical and some money towards loss of income. If you're retired and have medical then you don't need this type of coverage. I dumped mine last year.

One Home Owners Ins. take a look at Peoples Trust. I also live in Fla. and I'm looking at them now as my ins for the year ends next month. The quotes are so low I'm concerned about the stability of the company, so be careful.

 

[FUEGO]

As far as health goes, same thing. Until we have an acceptable universal health care system of some sort, you have a moral obligation to cover your own costs. I work in a hospital ER where a large percentage of non-paying patients come for routine care. Their costs are passed on to all who use the health care system. Again, unless your morals allow you to pass your own costs onto someone else, you have an obligation to pay your own way.

Unfortunately as an uninsured you can't opt to pay for just your costs at the hospital. You have to pay out of pocket for whatever costs you are charged, which undoubtedly include markups to cover the expense of non-payers. And as an uninsured you lack the bargaining power to negotiate more reasonable rates. So you are left with paying whatever you are charged regardless of the equity or fairness of said charges.

In an amoral system of hospital charges, how does one decide the best moral path? Maybe they will be nice and just charge you a reasonable amount.

 

[JOHNNIE36]

pedorrero, in reading your post, I immediately got the impression that you are just trying to get by "on the cheap". In other words, moral obligations be dammed. Since I also live in FL, please give me an idea as to where you live so I can stay the hell away from you. I think you are the type of person that would drive without insurance if it became too expensive. Sue me!! That's your motto.

 

[donheff]

pedorrero, in reading your post, I immediately got the impression that you are just trying to get by "on the cheap". In other words, moral obligations be dammed. Since I also live in FL, please give me an idea as to where you live so I can stay the hell away from you. I think you are the type of person that would drive without insurance if it became too expensive. Sue me!! That's your motto.

+1 $40K self insurance? - how far will that go when you run over a little kid on a bike and cripple him for life.

 

[Sarah in SC]

Kinda tough crowd, eh?
I can sympathize with Pedorro about wanting to reduce his rates and coverage to what is reasonable.

There are lots of folks in SC who carry the minimum liability (15k-30k-15k) and I myself carried that for many years when I couldn't afford more.
I knew that it wouldn't pay for some crippled kid on a bike, but it was legal and moral to carry that kind of coverage.

I now carry more coverage, but am not required to do so. Not advocating, just informing.

 

[FUEGO]

I carry the state minimums. At least till our insurance rates come down after DW's "accident" (scammer involved - long story ). I also try to avoid hitting kids on bikes . And I drive very little. And I drive defensively. And in a small car (less likely to result in a severe accident for whoever I hit). I know more about my risk profile than my insurance company does.

I figure anyone that I hit will try to screw me to the maximum extent possible. Why would I pay extra to give them more money? If I hit the proverbial 33 year old brain surgeon and chopped off both his hands, I'd file BK (since my touchable assets and debt make me technically insolvent). I'd have to anyway unless I had megamillions in umbrella coverage.

I do carry lots of extra liability insurance on my homeowner's policy for certain reasons. I know more about my risk profile than my insurance company does.

My position on liability insurance will eventually change when I have more assets that could be taken to satisfy a judgment.

I would simply suggest that everyone take measures and structure their affairs to protect themselves to a reasonable level.

 

[donheff]

I carry the state minimums. At least till our insurance rates come down after DW's "accident" (scammer involved - long story ). I also try to avoid hitting kids on bikes . And I drive very little. I figure anyone that I hit will try to screw me to the maximum extent possible. Why would I pay extra to give them more money?

I am sympathetic with the desire to keep costs down to a reasonable minimum. It would seem morally proper to carry enough insurance to cover likely "legitimate" claims in the event you seriously injure someone. Anything above that is self defense. If you cripple someone and your minimal insurance is not sufficient you can lose your ass(ets). If you have no assets to attach you have no reason for extra insurance.

 

[FUEGO]

I am sympathetic with the desire to keep costs down to a reasonable minimum. It would seem morally proper to carry enough insurance to cover likely "legitimate" claims in the event you seriously injure someone. Anything above that is self defense. If you cripple someone and your minimal insurance is not sufficient you can lose your ass(ets). If you have no assets to attach you have no reason for extra insurance.

Well, I think my state minimums are pretty good to cover a multitude of personal injuries. If the state sees fit to increase the minimums (to protect the public), I'll gladly pay for more to maintain the state minimums. After all, everyone else who is out there driving with state minimum insurance has not considered my well-being in their decision to have only the state minimums.

I pay for insurance to protect my interests. Not the interests of others. If others are concerned about the risk of injury, then they are in the position to get medical insurance, disability insurance and life insurance. I can't even begin to figure out their affairs and how much I need to pay to cover their well-being.

And in many cases, it might be that having lots of extra insurance would only serve to pay off the injured party's insurers (medical, disability, life, etc) through abrogation claims depending on the terms of the policies. So I should pay extra to cover the financial interests of a for-profit insurance company?

Additionally, much of my driving is done within the scope of my employment. Through the doctrine of respondeat superior, my employer is on the hook for my driving while done within the scope of employment. So any injured party would have some additional resource for recovery beyond my limited means.

And if any party is concerned that I may be underinsured, they can always purchase underinsurance policies to cover any potential deficit in insurance. Again, if this is a benefit an individual wants to receive, they are in the best position to know about it and pay for it. It ain't my responsibility.

 

[free4now]

I've been increasing my insurance recently. I used to forgo the collision deductible waiver, but decided that there's going to be more people out on the road unable to pay for their obligations in this environment. The lower my net worth, the less I want to self insure.

I suppose it's mostly just getting older, but I recently decided that the collision deductible waiver is good peace of mind. In the accidents where someone else has been responsible for my deductible, and don't pay, I end up spending way too many hours thinking about how to sue or seething that suing isn't practical. It's just better if I feel made whole rather than angry.

 

[pedorrero]

Thanks for the spectrum of responses. Moral duty? Variable. And what are the limits? i currently have an umbrella policy. What if I caused a horrible accident that exceeded even that limit (+ my assets?) Very unlikely, of course, but possible. If I lost a $10 million judgment, I have to declare bankruptcy. For you moralizers out there, i would never voluntarily go without health coverage, at least unless it became prohibitively expensive (a real possibility in our grand country). The auto i'll probably keep -- maybe with lower coverage. The home -- still undecided. i think that my house would be very unlikely to have a liability claim against it, compared to a destruction claim (fire, tornado, oh did I mention sinkholes?)

As for moral hazard, it works both ways. I would love to see universal coverage that was truly universal ... from Obama on down to the streetwalker a few miles east in worse parts of DC. Costs should be strictly a % of income, no min or max, with free care for the poor. Could still have rating for poor lifestyle choices (diet, exercise, alcohol, smoking, etc.) ... do stupid stuff, pay more in taxes. Sounds good to me

Oh, did I mention the moral hazards of Federal flood insurance and similar programs. You basically say: "sure, build your home on this sandbar! Since the greedy insurance companies won't write your policy, we'll stick the taxpayers with it." In a freer country, somebody wants his house on the shore fine. If a hurricane blows it away, tough luck. I guess he could get fire insurance ok

 

[RunningBum]

Usually an umbrella policy dictates that you keep pretty high liability limits on your house and car.