Author Topic: No homeowners insurance?!?!  (Read 2621 times)

GoingToMaine

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No homeowners insurance?!?!
« on: February 04, 2020, 07:52:25 AM »
Ok, so the latest blog post about the 2019 MMM spending had one part that bugged me.  I can deal with the exclusions from the budget and the explanations there.  And I can even accept his explanation on the lack of health insurance.  I don't fully agree with the thinking, but I can buy it. 

But no homeowners insurance?  To me that seems to cross the line from frugal to cheap.  I mean, sure, maybe replacing the house and its contents is easily within his means, but I'd be worried about the liability aspect.  It's like $600/year where I am, and for another $100/year I get a nice umbrella policy to cover the threat from the litigious nutcases that are out there.  So if the Amazon delivery guy falls off my porch or I mess up and hit someone with my bike, they can duke it out with the insurance company instead of me.  And that would go double if I were a somewhat public figure like he is.  They're bigger targets.  I don't love insurance, but from an asset protection standpoint I don't think there's a much better value than a homeowners policy paired with an umbrella policy.

spartana

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Re: No homeowners insurance?!?!
« Reply #1 on: February 04, 2020, 02:47:08 PM »
^ I haven't read the blog post yet but this would be my concern as well. My house insurance was $350 per year for what is an old 1000 sf crappy house on an expensive lot. Replacing the house wouldn't cost much but paying hundreds of thousands or millions in a liabity law suit would completely bankrupt me. I also have a million dollar umbrella policy that cost $200/year. So for approx $550/year I could potential save a lot of grief (and homelessness once my paid off house was sold to lawyer and law suit expenses). I just off set that amount by not buying fancy coffees and riding my bike (I'm currently car less).
« Last Edit: February 04, 2020, 02:49:43 PM by spartana »

norajean

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Re: No homeowners insurance?!?!
« Reply #2 on: February 04, 2020, 05:00:48 PM »
If someone trips on his sidewalk and is disabled for life they will probably clean out his savings, but he is probably making $1-2 million per year off the site now, so he can replenish all he needs to live on in a few months.

spartana

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Re: No homeowners insurance?!?!
« Reply #3 on: February 04, 2020, 07:09:35 PM »
That's true but it seems that paying under a $1000/year, especially for someone with such a high NW and annual income, vs the potential of paying millions if SHTF wouldn't be very impactful. That's money he could give to his favorite charity (or his favorite mustachians hint hint ;-)) rather than possibly lose it if he is sued. But I'm sure its less of a financial.issue for him and more of a personal issue not wanting to support insurance companies. For us "poor" mustashians that are FIREd with a leaner, more vulnerable stash, insurance is a no brainer.
« Last Edit: February 04, 2020, 07:11:41 PM by spartana »

ender

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Re: No homeowners insurance?!?!
« Reply #4 on: February 04, 2020, 07:13:15 PM »
Insurance is nearly always making the insurance company money.

That means almost everyone overpays for it.

If your home is not a meaningful part of your net worth, then this makes it pointless. Or, if you want to look at it differently, if the likelihood of the worst case scenario applying isn't statistically significant to you it's not.

Many/most claims for homeowners insurance would likely be fully paid out with a large deductible.

I am a bit curious though about how liability works - my understanding is most umbrella policies only expand existing liability coverage (but don't add to it). Maybe that also is a risk MMM feels comfortable self insuring.

GoingToMaine

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Re: No homeowners insurance?!?!
« Reply #5 on: February 05, 2020, 09:10:30 AM »
Insurance is nearly always making the insurance company money.

That means almost everyone overpays for it.

I disagree with the notion that the insurance company making money on insurance means that you're always overpaying for it.  There are plenty of products/services worth paying for that make their producer money.  There is value to be had beyond the cost of goods sold.  In my case, $700/year to protect against millions in losses in the case of a stupid accident is a pittance that provides a ton of value in both peace of mind and avoided potential losses. 

Of course, my value judgment is no more relevant or correct than his.  MMM may view himself as not susceptible to that risk and therefore doesn't see the value, and that's fine.  It's his money/life/decision. 

But what really bugs me is that I think advertising it on a site like this, from a position of authority, is face punch worthy in two ways.

1.  It's going to lead to someone going without homeowners insurance who really can't afford to.  They will lose their shirt because of what is, for the vast majority of the population, objectively bad advice.  I know the readers of this site are in general an intelligent group who can make their own decisions, but there's a dumdum in every crowd.  It's not nice to give the dumdum bad ideas.

2.  He's slapped a target on his own back.  He's a somewhat famous person who is known to have money.  He's likely very identifiable in his community and his real name and location are known to the world.  Now the slip and fall artists and other people with less than honorable intentions also know that they can take a crack at getting a piece of that pie, or at least cause him significant grief, without taking on an insurance company and their army of lawyers.  Heck, if he's willing to self-insure, maybe you'll get really lucky and he'll try to represent himself in court too.
« Last Edit: February 05, 2020, 09:16:33 AM by GoingToMaine »

spartana

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Re: No homeowners insurance?!?!
« Reply #6 on: February 05, 2020, 01:07:55 PM »
Insurance is nearly always making the insurance company money.

That means almost everyone overpays for it.

If your home is not a meaningful part of your net worth, then this makes it pointless. Or, if you want to look at it differently, if the likelihood of the worst case scenario applying isn't statistically significant to you it's not.

Many/most claims for homeowners insurance would likely be fully paid out with a large deductible.

I am a bit curious though about how liability works - my understanding is most umbrella policies only expand existing liability coverage (but don't add to it). Maybe that also is a risk MMM feels comfortable self insuring.
The problem isn't with the cost to replace the house or to cover small claims. Those can be relatively inexpensive or even DIY stuff. The issue is the need to protect your personal wealth (and future income/wealth which could be garnished) if someone sues you. Be that for an accident with your  car (or bike) or on your property.

The umbrella policy tops off your homeowners or car liability limits. So if someone falls on your property and sues you beyond your homeowner liability limits your umbrella covers it up to a greater limit (one million beyond my homeowners or car limits in my case). The person who fell or his insurance company can sue for beyond that amount but unless they have huge on-going medical expenses it is likely they will settle with my insurance company at a number within my liability limits and it won't personally impact me.

For me I look at the approx $550/year cost of homeowners and umbrella the same way as I would home maintenance or repairs. Just like getting a new roof to protect from "potential" leaks and "potential" more costly damage. Replacing the 60 year old original plumbing and electrical in my old house to protect against "potential" leaks or fires that may cause more costly damage. Etc. Replacing or repairing those things, even if DIY, cost me much much more to replace and upgrade then $550/year for a bunch of years. But most of us do it because we know there could be more costly issues if we don't.  Insurance is like wearing a condom (or so I assume). They cost a little bit of money, they are a PITA and uncomfortable, but compared to the much greater risk, and possibly lifelong ramifications, of a pregnancy or disease they are well worth it.
« Last Edit: February 05, 2020, 01:15:35 PM by spartana »

Laura Ingalls

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Re: No homeowners insurance?!?!
« Reply #7 on: February 11, 2020, 10:38:35 AM »
I think he has put a target on his back.  I also find it interesting that the co-owned Leaf has comprehensive (something that is was easier to self insure for than personal liability and a home and its entire contents.) Issue in the demise of his relationship?

I personally would have a hard time being in a long term relationship with someone over 40 that hadnít had a physical or dental cleaning.  The hubris in both not having homeownerís or your teeth cleaned would both irritate the crap out of me.  But I donít have the backstop of moving to Canada for healthcare either.

OtherJen

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Re: No homeowners insurance?!?!
« Reply #8 on: February 11, 2020, 03:43:15 PM »
I personally would have a hard time being in a long term relationship with someone over 40 that hadnít had a physical or dental cleaning.  The hubris in both not having homeownerís or your teeth cleaned would both irritate the crap out of me.  But I donít have the backstop of moving to Canada for healthcare either.

...Yes. Even if you think you're invincible, you aren't. Case in point: I got my first cavity last year, at age 41. I've always taken good care of my teeth and always had at least annual dental checkups (except for a couple of years during grad school when I didn't have dental insurance and was on a barebones budget). This cavity was still minor and hidden in the deep crevice of a back molar. It didn't cause discomfort and without regular checkups, I wouldn't have known it was there until it became major. I was able to have it filled quickly and inexpensively, thus protecting my tooth and (hopefully) avoiding more significant and expensive dental procedures.

(This is also a good reminder to schedule GP and gyno exams. Will add those to my to-do list.)