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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: John Chen who wrote (160371)	10/26/2008 10:16:09 PM
From: neolib	Read Replies (2) \| Respond to of 306849

That's probably true in most instances. Same should be true for all users of insurance. Insurance does not pay for the expected, it pays for the unexpected. If you are buying insurance for the expected, you are acting unwisely, since your are handing about a 30% premium to the insurance co. Why do that? As I stated, insurance provides two major benefits, 1) risk averaging across parties for statistically rare events, and 2) time averaging for both the rare events and expected events. If you have good reason to know that 1) does not apply, and you have the self-discipline to handle the time budgeting of 2) (as well as enough upfront savings in case of an early hit), then you self insure. Simple as that. But that is night and day from saying that because I'm young and healthy today, and not in needs of medical attention, I don't need insurance today. That is idiotic. Same goes for car insurance. Most seldom/never used it, but the 'SYSTEM' is designed so that we cannot afford not to have it. No, it is not a conspiracy of the system, there are plenty of good reasons for wanting the damages from unlikely accidents to be covered in a straightforward manner. That is exactly what insurance can do by the above two stated principles. Conversely, the damages from common problems like rock chips on your window are idiotic to cover by insurance, yet people commonly do this. That is merely inefficient and enriches the insurance company. Insurance should cover the high end, what you can't pay, not the low end, which is easy to budget for and pay yourself. Hence the richer you are, the higher deductible you should carry, and the cheaper your insurance will be. As I noted earlier, insurance in the USA as practiced today mixes other functions which just confuse the issue IMO. For example, my medical insurance functions as a very significant cost containment, essentially as a club discount card. If you have the card, you get 30-50% off from what I've seen. If you lack the discount card, you get stiffed for the inflated list price. Talk about a screwed up system!