I should have known that at the price of a small premium I could have insured myself against a lot of negative and annoying things in life. Most people have insurance for their health care, liability insurance, and insurance for their car. But you can basically ensure yourself against everything such as the inability to work or your belongings. So to prevent the hassle of bad events and time wasted dealing with them, I plan to insure myself for more negative outcomes in the future.
I also tend to invest more rather than less in insurance. This includes legal insurance, etc. Exceptions include travel insurance, supplemental life insurance, and cell phone insurance — where the hassle of submitting an Asurion claim, combined with the deductible, left me more willing to bear future full replacement costs. Until recently I also had an unwise habit of choosing PPO rather than more-minimalist HDHP health insurance plans. I switched when I better understood how U.S. tax laws make the HDHP/HSA combination attractive for relatively healthy people in their 20s and 30s.
That said, I do think this EA-leaning personal finance writer is onto something with his minimalist approach to insurance. Even if I’m far from his school of thought in personal practice, as he wrote in 2011′s Insurance: A Tax on People Who Are Bad At Math?, self-insuring in many categories beyond travel, life, etc., likely makes sense for more people than currently practice self-insuring:
Get almost [no insurance]. Especially if you already have a healthy stash of savings built up and could thus afford any unexpected expenses...
Then for the insurance lines that you are keeping, do a nice afternoon of shopping around – I did this last January and sliced about $300 per year off of my remaining home and car insurance...
Then put all the savings from these premiums into growing your nest egg, realizing that you are now getting paid to be your own insurance company.
It sounds risky if you let the fear creep in. But it should actually feel deeply satisfying and safe. By not buying into a product where the odds are stacked against you, you are STATISTICALLY likely to win. We can’t predict the future, but we do have one tool that lets us turn the unknown to our advantage, and that is statistics....
Over the past 10 years, I’ve saved about $40,000 in insurance premiums compared to the average level of spending, and now that $40K is sitting alongside my other employees, producing $2,800 of passive income each year, and already more than big enough to cover replacing a crashed car or paying any possible deductibles on medical bills.
And after 10 years of relatively exciting living, I haven’t even had to dip into it once. Now I see why insurance companies make so much money!
Personal preference is important here as I’d rather forego other “luxuries” to overpay a few hundred dollars a year for certain categories of peace of mind, but I’ve appreciated learning the minimalist perspective and adopting small parts of it in recent years.
I also tend to invest more rather than less in insurance. This includes legal insurance, etc. Exceptions include travel insurance, supplemental life insurance, and cell phone insurance — where the hassle of submitting an Asurion claim, combined with the deductible, left me more willing to bear future full replacement costs. Until recently I also had an unwise habit of choosing PPO rather than more-minimalist HDHP health insurance plans. I switched when I better understood how U.S. tax laws make the HDHP/HSA combination attractive for relatively healthy people in their 20s and 30s.
That said, I do think this EA-leaning personal finance writer is onto something with his minimalist approach to insurance. Even if I’m far from his school of thought in personal practice, as he wrote in 2011′s Insurance: A Tax on People Who Are Bad At Math?, self-insuring in many categories beyond travel, life, etc., likely makes sense for more people than currently practice self-insuring:
Personal preference is important here as I’d rather forego other “luxuries” to overpay a few hundred dollars a year for certain categories of peace of mind, but I’ve appreciated learning the minimalist perspective and adopting small parts of it in recent years.
Thanks for a thoughtful post!