Author Topic: Mr Money Mustaches 2016 budget- ??? does not insure house  (Read 4373 times)

skp

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Mr Money Mustaches 2016 budget- ??? does not insure house
« on: May 24, 2017, 07:26:55 PM »
I'm new here.  Can anyone tell me why Mr Money Mustache does not insure his home?  Personally I would prefer to be self insured for the replacement value of my home.   But I'm terrified of not having liability insurance.  Especially with his net worth, isn't he afraid?  I see that I was not allowed to ask him about it so I am asking you. :)

MarciaB

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #1 on: May 25, 2017, 12:27:40 PM »
It seems like an odd risk to me too, I've always questioned that decision. Guess he figures he has so much money he can self-insure.

ketchup

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #2 on: May 25, 2017, 12:45:04 PM »
His house, his rules.  I don't know if I'd be ever comfortable with that, but my perspective is so different that it's hard to relate.

Optimiser

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #3 on: May 25, 2017, 05:39:17 PM »
He mentioned the liability issue in the comments:

"Right – the key is that no genuine person would actually hurt themselves on my property and want me to pay – because I don’t maintain a grossly negligent and dangerous property.

If such a lawsuit was filed, it would have to be by an opportunistic, dishonest dickhead. Our judges are trained to recognize and not reward this type of exploitation of our legal system. So they wouldn’t win the suit, but I might be out some legal bills. However, I have an amazing law firm (thanks to this blog), and the incident would give me months or years of interesting stories to tell – and the writing would more than pay for the legal work :-)"

tooqk4u22

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #4 on: May 26, 2017, 09:40:02 AM »
He mentioned the liability issue in the comments:

"Right – the key is that no genuine person would actually hurt themselves on my property and want me to pay – because I don’t maintain a grossly negligent and dangerous property.

If such a lawsuit was filed, it would have to be by an opportunistic, dishonest dickhead. Our judges are trained to recognize and not reward this type of exploitation of our legal system. So they wouldn’t win the suit, but I might be out some legal bills. However, I have an amazing law firm (thanks to this blog), and the incident would give me months or years of interesting stories to tell – and the writing would more than pay for the legal work :-)"

Except that it happens all the f'in time because the world is full of dickheads and lax legal system....one trip and fall is all it takes.

Paul der Krake

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #5 on: May 26, 2017, 09:45:27 AM »
Are there documented cases of people successfully obtaining a judgement for falling on someone's property where the property owner wasn't grossly negligent?


2wanderers

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #6 on: June 08, 2017, 03:56:39 PM »
The decision to self-insure makes sense in MMM's case.  I would suggest you have to be well beyond financial independence for that to be the case.  Having a hobby business that pays many multiples of your annual spending probably qualifies.

It does bother me that he gives a metric for a "bare bones" financial independence lifestyle that subtracts a few luxuries but doesn't add back in these sorts of savings that make sense for him, but not for many retired-types.

a1pharm

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #7 on: June 10, 2017, 08:20:15 AM »
It does bother me that he gives a metric for a "bare bones" financial independence lifestyle that subtracts a few luxuries but doesn't add back in these sorts of savings that make sense for him, but not for many retired-types.

I think you missed the point: MMM doesn't invite dickheads to his personal residence.  By only inviting decent people into his home, he doesn't expose himself to the risk of lawsuits.  Anyone can follow this advice.  One potential problem would be if little MMM invites a friend over who has dickhead parents, and the friend gets hurt.

Keep in mind, virtually all insurance companies settle these types of injury cases.  In MMM's situation, he would litigate the shit out of any claim.  Knowing this ahead of time may make smart dickheads back off.  Dumb dickheads are still a problem, but overall I think his strategy of just avoiding those types of people is a good risk minimization strategy.

Also, we don't know exactly how MMM's networth is structured.  His blog and other business assets may be shielded from a personal liability claim.  If that is true, then he just has to worry about losing his house and his personal investments, which are probably around 1 million.  His blog is worth a few times that amount.  Therefore, he can absorb a 1 million loss personally, and just shift some business worth back to himself if the shit does ever hit the fan.  Most other people cannot.

talltexan

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #8 on: June 27, 2017, 07:47:40 AM »
I don't think most people appreciate how emotionally difficult it is to go through this type of litigation. You truly have to be a maladjusted human being for this type of activity to even make sense. It's so much easier to make money through VTSAX.

Larsg

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #9 on: July 15, 2017, 08:56:48 PM »
As to not inviting dickheads onto property or kids w/Dickhead parents:

I grew up in CA where there are tons and tons of Dickhead happy people that were opportunistic this way. It was sadly a part of the culture we lived in. That said, in our community, the non-dickhead parents would always require parents they thought were dickheads to sign a document that released them from any liability of accidental injury if their kid wanted to play at their house. This was a very common occurrence.  I had completely forgotten about this as I moved away from CA and do not reside in dickhead communities any longer. But, if I had pool, or  met parents that seemed to be dickheads then I might do that or just have the kids play in a public place if I was concerned. We strive hard to keep ourselves out of these entanglements. We are insured, yes, but at the same time we do our own lawn (Chemical Free), clean gutters, and only use roofers or other repair people that are licensed and bonded. We keep entries and exits to our property to a minimum and do not let anyone in the house or yard (Fenced, even the mail man/delivery people have to show their face and purpose before entry. This is in fact behavior driven from growing up in CA.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #10 on: July 16, 2017, 02:09:21 AM »
He mentioned the liability issue in the comments:

"Right – the key is that no genuine person would actually hurt themselves on my property and want me to pay – because I don’t maintain a grossly negligent and dangerous property.

If such a lawsuit was filed, it would have to be by an opportunistic, dishonest dickhead. Our judges are trained to recognize and not reward this type of exploitation of our legal system. So they wouldn’t win the suit, but I might be out some legal bills. However, I have an amazing law firm (thanks to this blog), and the incident would give me months or years of interesting stories to tell – and the writing would more than pay for the legal work :-)"

It's all well and good to say you're not negligent ("gross" negligence is not actually required for liability), but it's arrogant to think you can control everything.

Lets say you have a really good friend.  Lets say your kid spills some water on the ground and your really good friend slips and has permanent brain damage.  He doesn't have LTD coverage.  Wouldn't it be nice to have a nice big umbrella policy to take care of your friend even if he's a total bro and doesn't want to sue you? 

Lets say he does have some kind of insurance.  Well guess what they are probably suing you to recover their losses.  He doesn't have a say in the matter, although I guess he could lie.

IMO, this is a clear case of being cheap not frugal.  It's just a few hundred per year.
« Last Edit: July 16, 2017, 02:12:02 AM by dragoncar »

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #11 on: July 16, 2017, 02:15:34 AM »
Are there documented cases of people successfully obtaining a judgement for falling on someone's property where the property owner wasn't grossly negligent?

Again, gross negligence is not required for liability.  Generally speaking, it's simple negligence.

MMM may be a smart guy, but I can guarantee he's never read a Torts casebook if he thinks he can remove litigation risk just because his online persona is a hyper attentive badass.  I always thought this persona was hyperbole, but if his reasoning really is that he's never made a mistake in his life, and never will, I can't respect that.
« Last Edit: July 16, 2017, 02:27:47 AM by dragoncar »

Paul der Krake

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #12 on: July 20, 2017, 05:04:29 PM »
Are there documented cases of people successfully obtaining a judgement for falling on someone's property where the property owner wasn't grossly negligent?

Again, gross negligence is not required for liability.  Generally speaking, it's simple negligence.

MMM may be a smart guy, but I can guarantee he's never read a Torts casebook if he thinks he can remove litigation risk just because his online persona is a hyper attentive badass.  I always thought this persona was hyperbole, but if his reasoning really is that he's never made a mistake in his life, and never will, I can't respect that.
Okay, where do I find a torts casebook that will definitely convince my layman contrarian mind that this is a real risk?

Not scary statements from lawyers saying "this can happen". Actual cases where it has happened. Or is there a reason these cases are not public or never linked to? Show me the source, Luke.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #13 on: July 21, 2017, 01:48:40 AM »
Are there documented cases of people successfully obtaining a judgement for falling on someone's property where the property owner wasn't grossly negligent?

Again, gross negligence is not required for liability.  Generally speaking, it's simple negligence.

MMM may be a smart guy, but I can guarantee he's never read a Torts casebook if he thinks he can remove litigation risk just because his online persona is a hyper attentive badass.  I always thought this persona was hyperbole, but if his reasoning really is that he's never made a mistake in his life, and never will, I can't respect that.
Okay, where do I find a torts casebook that will definitely convince my layman contrarian mind that this is a real risk?

Not scary statements from lawyers saying "this can happen". Actual cases where it has happened. Or is there a reason these cases are not public or never linked to? Show me the source, Luke.

Local law library?  These cases are all public.  Here's one that crossed my mind: https://en.wikipedia.org/wiki/Rowland_v._Christian

I found some case summaries here (http://www.casebriefs.com/blog/law/torts/torts-keyed-to-epstein/affirmative-duties/rowland-v-christian-2/).  The link is to a fun little case where some little kid (little MMM?) innocently but intentionally kicks another kid in the shin.  Lo and behold, the kid has some rare condition causing loss of limb.  This is just the tip of the iceberg.

If you go through the table of contents at that link, there are lots of goodies, although navigation is not the best.  There may be better resources.

Now, I'm not saying these things are likely to happen -- in fact, I assume they are decidedly unlikely considering how cheap liability insurance is.  However, there is a small chance of ruin.  That's exactly the kind of thing I want to insure against.

And even if MMM is somehow perfect, never allows anything on his property to be unsafe for even a second, never makes a single mistake on the road, maintains Imperius control over his wife, child, and employees, do you trust the court system to be 100% perfect?  You think a jury has never incorrectly found negligence before? 


« Last Edit: July 21, 2017, 02:00:14 AM by dragoncar »

specialkayme

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #14 on: July 21, 2017, 06:44:56 AM »
I wouldn't say MMM's strategy is baseless, or dumb. In fact, from a statistical standpoint, it probably makes sense.

At least conceptually, your insurance company is aware of the odds of loss. They annualized those odds times the average lawsuit size to get an annual "loss." Then they add their administrative expenses, and add a projected profit margin to get your rate. They take that rate and invest it, creating returns greater than the "annualized" loss, and presto they make money. If you can eliminate their administrative expenses and projected profit margin, that's money in your pocket.

Let me start off by pulling some numbers out of my a**.
Looking at my state, NC has a population of approximately 10,150,000.
According to the US census bureau from 2010, the average US household size was 2.58. That makes 3,934,108 households in NC.
I would estimate there are about 100 liability "lawsuits" or other claims made per county in NC per year (total number out of my a**, but a place to start).
There are 100 counties in NC.
Which makes 10,000 "lawsuits" or other claims made in NC per year.
If you own a home in NC, that means you have a 0.254% chance that this year you'll have a claim made against you (10,000/3,934,108).
Each of these claims will probably run anywhere between $1,000 (pay an attorney to tell the other side to p*ss off) to $100,000 (for considerable medical or property damage). But lets say it averages out to $20,000 per incident (in both attorneys fees on your end and medical bills).
Annualized, that makes $50.83 in liability per household per year ($20,000*0.254%).

Now that doesn't include the million dollar weirdo lawsuit (where you find someone with an Eggshell Skull (https://en.wikipedia.org/wiki/Eggshell_skull)). Lets say one of those happens per year in NC. That makes your odds of liability 0.00002%, or annualized at $0.20 per year ($1,000,000*.00002%).

So total annualized liability equals $51.03. If you're paying more than that, statistically speaking, you're overpaying for insurance. My annual premium is about $500.

Now that doesn't count property damage to your home (hail, tree falls) or your neighbor's home (your tree falls on your neighbor's home) but you get the idea. And yes, all those numbers are completely made up, but you can play with them as you see fit to see where you think it should be.

Essentially though, MMM is calculating is projected liability as:
A*B*C*D
Where:
A = statistical odds that he'll be negligent
B = statistical odds that he'll invite a "dickhead" into his home
C = statistical odds that his attorney won't get him out of it anyway
D = statistical odds that the judge or jury won't protect him

MMM assumes that C and D are fairly low odds. He also believes that, based on his own actions, A and B are fairly low too. Which means his projected liability is less than average. How much less? I don't know, maybe half or a quarter? But if average liability is equal to $51.03 per year, and his is a third of it, his projected liability is $17.01.

But that's all playing the odds and statistics. Statistically speaking, more sex is safer sex https://www.amazon.com/More-Sex-Safer-Unconventional-Economics/dp/1416532226 which we all know doesn't exactly work quite right.

Having seen horror stories of "dickheads" wondering onto your property (to sell bibles or some nonsense), horror stories of negligence by fairly astute people, horror stories of judges or juries that screw someone's life up, I'll pay my $500 per year and not worry about it. Based on the 4% rule, I need $12,500 in the bank to pay my insurance, which is less than the average "claim" incident based on my math. So I'm happy with it, knowing if I have one incident in my life I've saved money by having the insurance. But that's me.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure hous
« Reply #15 on: July 21, 2017, 12:52:00 PM »
I recall MMM saying you should insure against problems you can't afford.  To that end, it is inconsistent for him not to have a nice big liability coverage.  If I'm mkisremembering his original position, then it's consistent.

He has the legal right to take on that risk of ruin (although some could argue you have a moral duty to insure against harm to others).  I personally would not, and would not recommend it.

I do think he is oversimplifying and underestimating the risks involved.  Maybe it's just hyperbole or maybe he just doesn't want to get into it but is fully aware.  I don't know, but to the extent any of his readers take his cue, I think they should be properly informed that it could end very very badly.

My main point is simply that "I don't maintain grossly negligent conditions at home or invite litigious people" does not really do much to mitigate the risk and is pretty arrogant (although that's his schlock, it didn't come off as Sctick to me)
« Last Edit: July 21, 2017, 12:54:07 PM by dragoncar »

Paul der Krake

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #16 on: July 23, 2017, 09:15:27 PM »
Thanks for the links, dragon.

Kyle Schuant

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #17 on: July 23, 2017, 09:19:46 PM »
in our community, the non-dickhead parents would always require parents they thought were dickheads to sign a document that released them from any liability of accidental injury if their kid wanted to play at their house.
Seriously, what the FUCK?
Athletic Club East - curing iron deficiency

specialkayme

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #18 on: July 24, 2017, 07:09:26 AM »
in our community, the non-dickhead parents would always require parents they thought were dickheads to sign a document that released them from any liability of accidental injury if their kid wanted to play at their house.
Seriously, what the FUCK?

Yeah . . . reading that made me a little nauseous. And I'm an attorney.

talltexan

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #19 on: July 24, 2017, 07:23:11 AM »
There's also the possibility that MMM has started using shell corporations to protect many of his assets. Or that he has the insurance anyway, but it's paid by the business.

Or that he says he doesn't carry the insurance, but that once someone chooses to engage with him legally, that person would find that he actually does. Or that Mrs. MM took out the insurance, but never told him, allowing him to maintain the brand while also being shielded from these tail risks.

specialkayme

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #20 on: July 24, 2017, 09:49:22 AM »
There's also the possibility that MMM has started using shell corporations to protect many of his assets.

A considerably worse idea than just not having insurance.

If you're not sure why, read up on your state's exemptions (individuals can claim a homestead exempt, companies can not) and negligence liability (if the injured party was hurt due to negligence, the individual AND the company can be sued, saving nothing).

talltexan

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #21 on: July 24, 2017, 09:51:25 AM »
As long as we're brainstorming (thanks for the advice about shell corp's!), it's also possible that the unique exposure of being an internet personality has elevated the risk of insuring MMM in the eyes of insurance companies such that the prices he is quoted are higher than the prices regular folks like us would be quoted.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #22 on: July 24, 2017, 02:01:15 PM »
There's also the possibility that MMM has started using shell corporations to protect many of his assets.

A considerably worse idea than just not having insurance.

If you're not sure why, read up on your state's exemptions (individuals can claim a homestead exempt, companies can not) and negligence liability (if the injured party was hurt due to negligence, the individual AND the company can be sued, saving nothing).

Yeah, liability protection usually only goes one way (owner is protected from liability of company, not the other way around), and there are still plenty of ways to get around that if the owner is sloppy with separation (for example, buying personal liability insurance with company funds)

All of talltexans possibilities are true, of course, but in this case I think MMM lying/decieving/hyperbole is not doing his readers any favors.  Even if he personally will be fine, it sounds like readers are taking a cue from him when most don't really don't have the same assets or protection options as him.

tooqk4u22

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #23 on: July 25, 2017, 08:33:11 AM »
As long as we're brainstorming (thanks for the advice about shell corp's!), it's also possible that the unique exposure of being an internet personality has elevated the risk of insuring MMM in the eyes of insurance companies such that the prices he is quoted are higher than the prices regular folks like us would be quoted.

I don't know that he would be quoted any higher, but the this would be even more of a reason to have a policy because he has so publicly put it out there the cup has runneth over with money it almost advertises to come sue me.