Author Topic: Mr Money Mustaches 2016 budget- ??? does not insure house  (Read 10205 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?

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.

SnackDog

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #24 on: November 09, 2018, 10:15:27 AM »
MMM has an annual income that could replace his required net worth very quickly (in a year or two) in the event a lawsuit bankrupted him.  If he actually need to maintain his excess net worth, he would need insurance and umbrella insurance on top of that.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #25 on: November 11, 2018, 11:54:57 AM »
MMM has an annual income that could replace his required net worth very quickly (in a year or two) in the event a lawsuit bankrupted him.  If he actually need to maintain his excess net worth, he would need insurance and umbrella insurance on top of that.

Future income isn’t safe from a lawsuit.  Not all debt is dischargeable, it really depends on the source of the debt

Telecaster

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #26 on: November 11, 2018, 03:52:13 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?

Yes.  Happened on a commercial property owned by my parents.  Someone claimed they tripped on uneven asphalt and wanted $25,000 in damages.  That's right on the cusp where it is usually just cheaper to settle than fight it.   However, the asphalt was brand new, with no trip hazards what-so-ever, and the property was immaculately maintained,  and the woman had a history of filing these types of lawsuits.     So the insurance company decided to fight it.  When the smoke cleared, the woman wound up winning $68,000, which was paid by the insurance company.  Moral of the story is if you want justice don't rely on the court system.  When you go to court crazy stuff happens that defies logic and reason, so just assume crazy stuff will happen. 

Re: the MMM article.  I haven't read it, but I get it.  It is almost always cheaper and better to self-insure.  But you really do have to self-insure if you go that route.   So I understand MMM's decision.  Personally, in the case of homeowners insurance I am unwilling to take a huge loss like that.  Homeowner's insurance isn't that expensive and you get a lot of protection.  I'm happy to pay it.

caracarn

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #27 on: December 03, 2018, 12:20:40 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?
One thing to keep in mind is you do not even need to get to the point of obtaining a judgment.  I had someone sue me for what I felt was clearly a frivolous lawsuit about a house I sold.  The case took 30 months to wind its way through the courts and various appeals these people kept filing.  I also want to state I never actually stepped foot in a court room this entire time.  The case was dismissed with summary judgment in the lower court and the appeals and state supreme court (yes they appealed all the way there, but got turned down) involve the attorneys only for the little court time at the appellate level.  My final bill?  Over $60K.  That would be a lot for a low cost budget to absorb.  I was pretty angry with the money flowing out when I had income.  I can only imagine how I'd feel living of a fixed nest egg that was suddenly significantly drawn down. 

talltexan

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #28 on: December 06, 2018, 08:08:06 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?
One thing to keep in mind is you do not even need to get to the point of obtaining a judgment.  I had someone sue me for what I felt was clearly a frivolous lawsuit about a house I sold.  The case took 30 months to wind its way through the courts and various appeals these people kept filing.  I also want to state I never actually stepped foot in a court room this entire time.  The case was dismissed with summary judgment in the lower court and the appeals and state supreme court (yes they appealed all the way there, but got turned down) involve the attorneys only for the little court time at the appellate level.  My final bill?  Over $60K.  That would be a lot for a low cost budget to absorb.  I was pretty angry with the money flowing out when I had income.  I can only imagine how I'd feel living of a fixed nest egg that was suddenly significantly drawn down.

I, too, had an experience like this with a property we sold in Ohio. We ultimately settled because I thought it would conclude the matter at lowest cost. I have tried to rethink the decisions I made, point-by-point, to try to figure out how I could have saved money in that (it was ultimately 16 months, $10,000 in legal fees, and a $14,000 settlement for a house sale at $345,000), and I honestly cannot.

What made it easier to stomach was a frugal lifestyle that allowed my wife's and my net worth to increase by $300,000 over the two years since we sold that house.

caracarn

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #29 on: December 07, 2018, 11:33:41 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?
One thing to keep in mind is you do not even need to get to the point of obtaining a judgment.  I had someone sue me for what I felt was clearly a frivolous lawsuit about a house I sold.  The case took 30 months to wind its way through the courts and various appeals these people kept filing.  I also want to state I never actually stepped foot in a court room this entire time.  The case was dismissed with summary judgment in the lower court and the appeals and state supreme court (yes they appealed all the way there, but got turned down) involve the attorneys only for the little court time at the appellate level.  My final bill?  Over $60K.  That would be a lot for a low cost budget to absorb.  I was pretty angry with the money flowing out when I had income.  I can only imagine how I'd feel living of a fixed nest egg that was suddenly significantly drawn down.

I, too, had an experience like this with a property we sold in Ohio. We ultimately settled because I thought it would conclude the matter at lowest cost. I have tried to rethink the decisions I made, point-by-point, to try to figure out how I could have saved money in that (it was ultimately 16 months, $10,000 in legal fees, and a $14,000 settlement for a house sale at $345,000), and I honestly cannot.

What made it easier to stomach was a frugal lifestyle that allowed my wife's and my net worth to increase by $300,000 over the two years since we sold that house.
Yeah, we asked them what it would take to settle.  Their response was the full amount, which was into the six figures, so we kept on a goin'.

merula

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #30 on: December 07, 2018, 11:51:00 AM »
Wow, necro-thread.

I'll chime in as an insurance professional. The kinds of cases mentioned in this thread are brought on a daily basis. Are they reasonable? Depends on your perspective. If a friend falls down my stairs because they're icy, I want her to have the care she needs. If a stranger does, I probably care less. But the law doesn't differentiate between the two.

For the average person, I don't think non-auto personal liability is a big deal, because states limit the amount of your assets that a creditor can go after. Your average non-Mustachian with a NW of $5,000? Any lawsuit would be foolhardy; you can't get blood from a stone. Even Mustachians are protected by homestead exemptions and ERISA protections. And if you're practicing stealth wealth, there's no good way for a potential claimant to differentiate between those two.

Not one of those statements apply to MMM. He's a public persona. Everyone knows where he lives and that he's got money. He has way more assets than can be legally protected from a judgment.

Now, if you really want to save money on insurance, buy a very high deductible policy with no bells and whistles. Find the carrier offering the highest deductible and call them and see if they'll go higher. They probably can make exceptions. And don't buy an umbrella.

caracarn

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #31 on: December 07, 2018, 11:57:21 AM »
And don't buy an umbrella.
Curious on your reasons for this.  I did not have one for a long time, but after the lawsuit I dug into things some more and determined to get one.  Given the level headed analysis on these boards, always happy to learn what I may not understand about something.

remizidae

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #32 on: December 08, 2018, 03:59:57 PM »
This thread is confusing "is it possible" with "is it likely." Sure, you can read horror stories about lawsuits. And horror stories about people who get killed riding bicycles. But MMM's whole philosophy is about refusing to live a life dominated by fear of very unlikely bad events. Rationally assess the risks versus the benefits, and act accordingly. Don't let the emotionally gripping anecdote twist your judgment.

SnackDog

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #33 on: December 08, 2018, 05:40:22 PM »
Actually insurance is all about mitigation against very unlikely events which could have dire consequences.  Since the consequences are not dire when you earn 10 times more than you need to live on, there is no need for insurance assuming you are willing to put your savings at risk.

Icecreamarsenal

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #34 on: December 17, 2018, 07:52:01 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? 




There are two types of people: those that have been through a lawsuit, and those that have not.  Unfortunately I fall into the former camp.  Twice.

merula

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #35 on: December 17, 2018, 10:31:21 AM »
And don't buy an umbrella.
Curious on your reasons for this.  I did not have one for a long time, but after the lawsuit I dug into things some more and determined to get one.  Given the level headed analysis on these boards, always happy to learn what I may not understand about something.

My core reason is that things that make their sellers boatloads of money are not usually a good value. As stated earlier, I work for an insurance company and one of my focuses is Umbrella insurance. (Commercial, but the concepts apply to personal umbrellas too.)

The first thing to understand is how the profit of insurance is measured, which is via something called a "combined ratio". The combined ratio is losses paid plus expenses, all divided by the premiums charged. A 100% combined ratio means that every dollar collected from premium was either paid out to policy holders or paid for company expenses (i.e. salaries, office rent, supplies, etc.).

If you take Auto insurance, the combined ratio for the industry overall has been over 100% for the last 10 years. Insurance companies haven't made money on auto since the iPhone was first introduced. (And yes, those are related.) Not only are there more accidents, but increasing medical costs make each claim more expensive, and there are a boatload of new carriers trying to gain market share. People are paying less and getting more value from their insurance.

Now, let's look at Umbrella insurance for the same period. Instead of 100%+ for the industry overall, the combined ratio has been around 70%. That's 30% profit right off the top, PLUS the investment income on all of the premiums paid (because Umbrella claims take a long time to come to the surface and longer to settle, so insurance companies invest the premiums in the meantime and keep the investment income).

The secondary reason is that most people don't really need it. I'll use myself as an example here. Let's say I caused a car accident that permanently disabled someone, and their true losses as a result of my actions was $3M. (That's not at all unusual. Someone who's in their 20's or 30's would have a bunch of lost income, plus lifetime medical expenses.) My auto insurance limit is $500,000, and the insurance company will pay defense expenses.

I don't have $3M. I don't even have $1M. The assets I have are in my house, 401k, IRAs, taxable brokerage account and my checking/savings accounts.

My 401k is protected from creditors by federal ERISA law. My IRAs are protected at their current balances by my state's laws, as is my house. The only assets I have that could be targeted are my taxable brokerage account and my checking/savings, which is mid-five-figures total.

In this situation, the person I injured would have to decide whether to accept the full insurance limit and walk away, or sue me for more. Their attorney would tell them that they could sue me, and they would likely win, but it would cost them $$$ in legal expenses, and they'd have to pay thousands for a subpoena for my financials to see what they could even get from me.

So their attorney would look at my house, my job, my car, all the publicly-available information on me, and say "chances are she has $10k max in accessible assets, probably less". Because that's true; most people are not mustachian. Most people in my neighborhood, with my car, have far less than average. And most likely that person would choose to walk away.

If they didn't, then I pay out my accessible assets, declare bankruptcy and walk away.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #36 on: December 17, 2018, 01:07:20 PM »
Merula, so your plan if you do cause someone a “true” loss of $3 million, cripple them so they can’t work again, basically ruining their life, is to underinsured and then use the law to leverage them into accepting a $500k settlement? 

For me, part of having umbrella is that I can make people “whole” if I truly cause them harm.  It’s just the right thing to do.  Even if I can weasel out of paying them, I’d rather pay a few hundred bucks a year to prevent feeling really really bad about it for the rest of my life.

How much of that premium is insurer profits?  Like tens of dollars per year?  I can live with that.  I might not be able to live with causing a terrible accident and walking away without fixing it as best I could

merula

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #37 on: December 17, 2018, 02:03:49 PM »
Merula, so your plan if you do cause someone a “true” loss of $3 million, cripple them so they can’t work again, basically ruining their life, is to underinsured and then use the law to leverage them into accepting a $500k settlement? 

For me, part of having umbrella is that I can make people “whole” if I truly cause them harm.  It’s just the right thing to do.  Even if I can weasel out of paying them, I’d rather pay a few hundred bucks a year to prevent feeling really really bad about it for the rest of my life.

How much of that premium is insurer profits?  Like tens of dollars per year?  I can live with that.  I might not be able to live with causing a terrible accident and walking away without fixing it as best I could

Them's high-falutin' words from a dragon reputed to assault cars. :)

I don't get into my car with the intent to cause anyone grievous bodily harm, and the chances that I ever would are very, very low. I've never caused an accident, and my one ticket was nearly 20 years ago. I drive <5,000 miles/year. My insurance limits are higher than most people's (I have $500k; the "recommended" personal limit is $100k, and legal minimums in some places are as low as $10k), and I have assets in excess of that amount that I could pay to try and make someone whole, if it came to it. Besides which, I know from dealing with these things that no one is ever "made whole".

Rather than relying on individuals to carry umbrella coverage, a better solution would be socialized medicine and disability insurance. But very few people stand to make boatloads of money on that solution, so it's unlikely to get a lot of press.

By all means, buy an Umbrella if you want to. Heck, your purchase of that Umbrella benefits me personally. The more people who do, the more in-demand my skills and the more money my industry makes. In fact, why don't you buy a higher limit? You have enough to pay for one person with $3M in injuries, but cars don't have just one seat, so you should probably buy $6M if you plan to hit a sports car, $12M if you plan to hit a sedan and $18M if you plan to hit an SUV.

FIRE@50

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #38 on: December 17, 2018, 02:18:06 PM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.

Scenario A: I have $100 in a savings account and I get sued for $200.

Scenario B: I have $100 in a savings account and an insurance policy for $100 and I get sued for $200.

Either way, I'm broke right?

caracarn

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #39 on: December 17, 2018, 02:29:05 PM »
Merula, so your plan if you do cause someone a “true” loss of $3 million, cripple them so they can’t work again, basically ruining their life, is to underinsured and then use the law to leverage them into accepting a $500k settlement? 

For me, part of having umbrella is that I can make people “whole” if I truly cause them harm.  It’s just the right thing to do.  Even if I can weasel out of paying them, I’d rather pay a few hundred bucks a year to prevent feeling really really bad about it for the rest of my life.

How much of that premium is insurer profits?  Like tens of dollars per year?  I can live with that.  I might not be able to live with causing a terrible accident and walking away without fixing it as best I could

Them's high-falutin' words from a dragon reputed to assault cars. :)

I don't get into my car with the intent to cause anyone grievous bodily harm, and the chances that I ever would are very, very low. I've never caused an accident, and my one ticket was nearly 20 years ago. I drive <5,000 miles/year. My insurance limits are higher than most people's (I have $500k; the "recommended" personal limit is $100k, and legal minimums in some places are as low as $10k), and I have assets in excess of that amount that I could pay to try and make someone whole, if it came to it. Besides which, I know from dealing with these things that no one is ever "made whole".

Rather than relying on individuals to carry umbrella coverage, a better solution would be socialized medicine and disability insurance. But very few people stand to make boatloads of money on that solution, so it's unlikely to get a lot of press.

By all means, buy an Umbrella if you want to. Heck, your purchase of that Umbrella benefits me personally. The more people who do, the more in-demand my skills and the more money my industry makes. In fact, why don't you buy a higher limit? You have enough to pay for one person with $3M in injuries, but cars don't have just one seat, so you should probably buy $6M if you plan to hit a sports car, $12M if you plan to hit a sedan and $18M if you plan to hit an SUV.
So my reason is a lawsuit on a house I sold.  Ended up costing over $60K in legal fees, which I was told, had I had an umbrella I could have gotten those fees covered, and if they had won also the settlement.  I would need to pay my premium for 200 years before I spent that, so thinking, it would make sense to have the umbrella in the event I get another sue happy buyer of my house next time I sell and they want to claim it was a bad deal.

Kyle Schuant

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #40 on: December 17, 2018, 05:47:35 PM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.
If the numbers are small then you don't need insurance. It's when the numbers are insanely big that you need insurance.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #41 on: December 17, 2018, 10:48:07 PM »


Rather than relying on individuals to carry umbrella coverage, a better solution would be socialized medicine and disability insurance.

Oh, I agree with this.  But since we don't have that, why are you willing to hang someone YOU hurt (unintentionally, but in the scenario you presented, you are at fault) out to dry?  It doesn't need to be like that.

FIRE@50

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #42 on: December 18, 2018, 11:06:59 AM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.
If the numbers are small then you don't need insurance. It's when the numbers are insanely big that you need insurance.
As I said, the numbers were small for simplicity. Feel free to add as many zeros as you want to get to what you consider insanely big.

dragoncar

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #43 on: December 18, 2018, 12:16:16 PM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.

Scenario A: I have $100 in a savings account and I get sued for $200.

Scenario B: I have $100 in a savings account and an insurance policy for $100 and I get sued for $200.

Either way, I'm broke right?

Let’s make it $1-$2 million to be more realistic (people don’t hire lawyers for $200 lawsuits).

Practically speaking, someone suing you for $2 million might be offered a $1 million settlement by your insurance company if they don’t think it’s worth fighting.  The person suing you will often just accept that because it’s a decent amount of money and going to court is expensive and time consuming.

But yeah, they could keep trying for your other $1 million in which case the insurance didn’t help you much.  I do believe they have to defend you (pay for the lawyers) but I’m actually not sure if that happens when they settle.  Until settlement, however, you definitely have someone responding to the suit for you without having to go find and pay for your own lawyer.  If a few hundred dollars per year saves me from having to hire a defense lawyer just once in my life it will have been totally worth it

Even in the case where insurance doesn’t save you from personal ruin, what I’ve been harping on in this thread still applies.  If the other person really was injured in the amount of $2 million, and they only get $1 million from you, well doesn’t that suck for them?  Put yourself in their position and you wouldn’t be happy (say you are on track to save $2 million for early retirement via your photography business but they negligently poke your eyes out... would you rather get $1 million from them or do you think they should have carried insurance to cover the second million?)

Of course, not all suits just happen to be for exactly your net worth plus the insurance amount.  If their injury was only $1 million, the insurance will totally cover you, whereas without insurance you would indeed be broke.
« Last Edit: December 18, 2018, 12:20:37 PM by dragoncar »

SnackDog

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #44 on: December 18, 2018, 01:58:28 PM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.

Scenario A: I have $100 in a savings account and I get sued for $200.

Scenario B: I have $100 in a savings account and an insurance policy for $100 and I get sued for $200.

Either way, I'm broke right?

You could apply the same reasoning to car insurance and elect not to buy it if you were confident the only claims against you would far exceed your coverage limits and eat up your assets.

What you are insuring against is losing ANYTHING that is yours by buying an appropriate level of cheap umbrella coverage that should provide for a rigorous (expensive) defense from an insurer.

martyconlonontherun

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #45 on: December 18, 2018, 02:18:21 PM »
1. You usually find out that your friend is a dickhead when they see you.
2. Considering MMM seems to abhore paying a licensed professional with liability insurance to do simple things he could do himself, I could see a thousand scenarios where the gross negligence could be because he repaired something himself.

Telecaster

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Re: Mr Money Mustaches 2016 budget- ??? does not insure house
« Reply #46 on: December 18, 2018, 02:20:20 PM »
I still don't understand how this type of insurance protects me from anything. I'll keep the numbers small for the sake of simplicity.

Scenario A: I have $100 in a savings account and I get sued for $200.

Scenario B: I have $100 in a savings account and an insurance policy for $100 and I get sued for $200.

Either way, I'm broke right?

Like everything, it depends.  If you go full on Chapter 7, then it is probably a wash.    In Scenario A, if you have an income stream, the opposing party could attach your wages or some such and they can continue to go after your income or assets for years until they get that last $100.   You can't get blood out of a turnip, but you do have the judgement hanging over your head, and they might decide to go after you later. 

The thing about Scenario B there is a chance the opposing side will simply stop at the $100 policy limit because that's the low hanging fruit.  And the other advantage is the judgement is settled, so they can't go after you in the future. 

I'm of the firm opinion that most insurance is a rip-off, and most people are better off self-insuring when they can.  But there are limits to how much risk I'm willing to take.  Homeowner's is not that expensive, you get big upside protection, and in many cases your stuff is covered even when you and it aren't at home.