Thanks for the insights. I am not in the industry. I hadn’t thought about the tax and creditor aspects of life insurance. I can see how those could become murky really quick. As for the cryogenics, yes I was thinking of some sort of life insurance policy. Maybe I should take it off my list since ‘permanent death’ would be financially devastating. My thinking was you probably have other things to focus on if you can’t pay it out of pocket.
As for house and renter insurance, I don’t think the insurance company’s profit is a good indicator of how much expected value they are for an individual—maybe a best case scenario. For example, these factors would vary by individual. Who is subsidizing them?
Subsidizing irresponsible dumb-asses (deep frying your frozen turkey indoors would qualify)
Subsidizing those with more stuff, better record keeping of it, and flat out liars
Subsidizing those who manipulate the claim adjuster better (are they as sympathetic to your case?)
I think the biggest thing people who haven’t thought about this deeply miss is how large the potential liability exposure is if you don’t carry property and casualty insurance. As your wealth rises, and the financial hit from losing your house becomes small enough that you could realistically self-insure (say net worth 10-20x home value), it starts to be pretty much mandatory to carry some kind of umbrella policy to insure against crazy liabilities, and nobody will sell you an umbrella if you don’t also have house/auto/etc. insurance. Like all insurance, this is -EV, but it’s so cheap compared to the potential loss that it’s generally crazy to go without it. The wealth threshold at which it could plausibly make sense to self insure entirely is in the super-rich range: probably around 100Mil$US
While you are probably subsidizing some dumb-asses to a degree, the bulk of your property risk is due to things out of your control like severe weather.
What most people should do, once they have a solid emergency fund is take a much higher than normal deductible on their auto and home/renters insurance. 5000-10000 deductibles will save a lot of money, but still keep you insured against catastrophic loss. Threshold for this is when you have a comfortable emergency fund, and I’d suggest a deductible equal to what you could save again in 6-12 months of belt-tightening without affecting your longer term financial planning. Health insurance, about the same, except most people are forced now to take a large deductible whether or not they can afford one.
Thanks for the insights. I am not in the industry. I hadn’t thought about the tax and creditor aspects of life insurance. I can see how those could become murky really quick.
As for the cryogenics, yes I was thinking of some sort of life insurance policy. Maybe I should take it off my list since ‘permanent death’ would be financially devastating. My thinking was you probably have other things to focus on if you can’t pay it out of pocket.
As for house and renter insurance, I don’t think the insurance company’s profit is a good indicator of how much expected value they are for an individual—maybe a best case scenario. For example, these factors would vary by individual. Who is subsidizing them?
Subsidizing irresponsible dumb-asses (deep frying your frozen turkey indoors would qualify)
Subsidizing those with more stuff, better record keeping of it, and flat out liars
Subsidizing those who manipulate the claim adjuster better (are they as sympathetic to your case?)
Subsidizing bad law
Subsidizing moral hazard
I think the biggest thing people who haven’t thought about this deeply miss is how large the potential liability exposure is if you don’t carry property and casualty insurance. As your wealth rises, and the financial hit from losing your house becomes small enough that you could realistically self-insure (say net worth 10-20x home value), it starts to be pretty much mandatory to carry some kind of umbrella policy to insure against crazy liabilities, and nobody will sell you an umbrella if you don’t also have house/auto/etc. insurance. Like all insurance, this is -EV, but it’s so cheap compared to the potential loss that it’s generally crazy to go without it. The wealth threshold at which it could plausibly make sense to self insure entirely is in the super-rich range: probably around 100Mil$US
While you are probably subsidizing some dumb-asses to a degree, the bulk of your property risk is due to things out of your control like severe weather.
What most people should do, once they have a solid emergency fund is take a much higher than normal deductible on their auto and home/renters insurance. 5000-10000 deductibles will save a lot of money, but still keep you insured against catastrophic loss. Threshold for this is when you have a comfortable emergency fund, and I’d suggest a deductible equal to what you could save again in 6-12 months of belt-tightening without affecting your longer term financial planning. Health insurance, about the same, except most people are forced now to take a large deductible whether or not they can afford one.