My position is to get insurance if I can’t afford to replace whatever I’m insuring. For instance, I don’t have a life insurance policy beyond the measly mandatory $25000ish (I forget the exact number) that is included in my employment contract. The reason is that although the money would be nice, our financial situation means that there won’t be any financial pain associated with my untimely death. Thus financial independence means no more life insurance for me.
We have the highest deductible possible on our car insurance. The reason is that if our car gets thrashed, we can easily buy a new one. Thus we are self insured. This also saves us a bit premium. In my mind, our main reason for having a car insurance is in the plausible case that we get involved in an accident and scratch the paint on somebody’s rear bumper and they subsequently sue us for psychological trauma, spilled coffee, or interrupted cell phone conversations. Verily, these days, accidents in this country seem more like a lucky shot at getting rich quick in a stupendous lawsuit. As far as I know if you are insured, the insurance company will fight for you.
We have not insured our stuff either. Seriously! The stuff that has sentimental value + important papers like university diplomas, etc. which is worth more way more to us than the insurance company is in a small $40 fire safe. The same thing goes for computers and electronics that although fully functional is so depreciated that we wouldn’t get much for it anyway! The rest can easily be replaced.
Health insurance. Now here’s a tricky one. I take very good care of my body. The last time I was sick was, I think, 3 years ago (a 24 hour stomach flu). It just pains me to be in the same group as smoking, obese and out of shape people and paying for all their health mistakes. I fully support the idea that smokers and overweight people should pay extra for their insurance since they are more likely to suffer adverse health effects and require expensive treatments later on for not taking care of themselves. Until then I prefer low premiums, very high deductibles, etc.
Disability/long term care insurance. Now I must admit that this is one point where I don’t have insurance but really should. Financial independence means that I don’t need a job to pay the bills. On the other hand, I have not figured in potential expensive nursing care. Living in a $50000/year extensive care facility would quickly finish off my finances. Something to look into.
The main point here is that insurance is a method for spreading risk. The insurance company takes a cut for this (if you look in their financial statements, you can figure out what that cut is by looking at the “combined ratio”=(“losses”+”underwriting expenses”)/”earned premiums”. It’s actually not much. ) and distributes the money to those who have “accidents”. Now you gotta ask yourself one question. Are you better off sharing risk with a random group of people or are you better off insuring myself. Well, are you, punk? (Could not resist the Dirty Harry reference 🙂 ).