Dear fellow Mustachians,
I could use some help on this topic. It seems like it makes sense on paper, but I'm having a hard time breaking my old ways of thinking.
I currently own outright 6 rental properties with an estimated value of around $500,000. That's a good thing. I also pay about $4,500/year or $375/month on insurance. That seems like a bad thing to me. Over the past 15 years I've had 2 claims for a total of $4,000. Yes, that's right, less than one year's premiums. What if I take the $375/month I now spend on premiums and invest in an Index fund? Make my own insurance.
Invest $375/month at 7% (using bankrate simple savings calculator)
Year 1: $4,648
Year 2: $9,631
Year 3: $14,975
Year 4: $20,704
Year 5: $26,848
Year 10: $64,909
Year 15: $118,864
Year 20: $195,351
And so on, so on. Of course, I would use this money for any "claims" I might have against my properties, therefore the estimate may not be so large. I currently have a $1,000 deductible. I recently asked for a higher deductible and was told $2,500 was as high as I could go. That would save me less than 10%.
My questions:
1. How would I protect myself against liability? Someone falls...injury....
2. Is there something I'm missing?
3. Am I crazy to do this?
I appreciate any insights and knowledge any of you can give me.
Thank you,
Gordon in Iowa