I have owned my current home since 1999 and have long since paid off the mortgage.

I have a family mortgage for two of my kids and was thinking about exploring doing a family self insure for the three homes.

Let us know what you figure out.

I daydream of going the self insurance route. I carry high-limits insurance with umbrella on top on 2 homes, 6 vehicles, an RV, and an airplane with no claims in 14 years and keep getting annual increases well above inflation.

TxAg20 said:

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Let us know what you figure out.

I daydream of going the self insurance route. I carry high-limits insurance with umbrella on top on 2 homes, 6 vehicles, an RV, and an airplane with no claims in 14 years and keep getting annual increases well above inflation.

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bingo.

Between homeowners, auto and rental (investment) property insurance I'm paying a small fortune.

I've had one "hail" claim on my home in 33 years of owning a home.

I realize there's risk involved, but I'm thinking about it, especially if I can get my kids on board.

Did you know the major insurance companies like Allstate, State Farm etc. each pay about $1 billion annually in advertising.

I self insure on windstorm

House is paid off

MFers denied my roof claim after Harvey so I decided to wing it

These reports show scale of premiums collected and loss ratios.

https://www.repairerdrivennews.com/2023/05/05/state-farm-holds-no-1-slot-in-naics-2022-top-25-pc-list/

https://www.insurancebusinessmag.com/us/news/breaking-news/insurance-companies-with-the-most-profitable-loss-to-ep-ratios-315798.aspx

Using State Farm as an example they had margins of 15% - 20% on average between the 2 years.

This report shows they spent $2.5B on advertising in 2021. That would be ~5% spent on advertising.

https://www.repairerdrivennews.com/2022/07/05/report-auto-insurers-spent-10b-on-advertising-in-2021/

I'm sure this is overly simplified, but I look at these as suggesting there is ~20-30% expected savings over time by self-insuring.

However, these companies can experience high volatility year-to-year in their insured losses (claims), as State Farm did. This is even with the large of large numbers on their side.

Self-insuring, even across P&C lines of coverage, across a few families, simply can't eliminate asymmetric outcomes.... small savings to modest savings annually with massive losses on occasion.

As redaszag said, reducing coverage is an option to at least manage premium and limit the bad outcomes when they happen. If you treat P&C coverage as catastrophic only, premium savings an be had by further reducing coverages/increasing deductibles, etc...

In my 33 years as a homeowner I've had one "hail" roof claim.

In that same 33 years I'm aware of one incident in the Cypress, Texas area where I live of fire or catastrophic damage when a worker hit a natural gas pipe and blew up a home.

The most likely thing is wind damage during a hurricane which I why i prefer to live in Cypress vs areas south of Houston.

redaszag99 said:

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I self insure on windstorm

House is paid off

MFers denied my roof claim after Harvey so I decided to wing it

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Does this mean you pay for fire insurance ?

txaggieacct85 said:

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In my 33 years as a homeowner I've had one "hail" roof claim.

In that same 33 years I'm aware of one incident in the Cypress, Texas area where I live of fire or catastrophic damage when a worker hit a natural gas pipe and blew up a home.

The most likely thing is wind damage during a hurricane which I why i prefer to live in Cypress vs areas south of Houston.

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Roughly 50% of people have less claims than average.

Some folks experience way less loss/claims than others. Fortunately, you have been in that group!

Having less claims than others for periods of time does not mean you will have less claims going forward. Would love data that refutes that, if it exists.

Everyone has their own attitudes toward risk and retention of that risk, just like we have varying degrees of withstanding various size/frequency of claims. These even vary over time for the exact same person.

Not trying to talk you out of anything. Not a P&C agent. Just adding a mathematical/behavioral perspective to the conversation.

I'm an insurance agent and we received a flood payment today of about $1,600 from a 92-year-old customer we've had for 40 years.

I was thinking about her owning that house since 1955 and paying flood premiums that whole time. Can you imagine if she'd invested that money for the last 40 years?!?!?

No doubt but one year of not paying it and if lives in an area where could food and house got pretty much destroyed. Could they have survived it financially?

Self insuring sounds great until something catastrophic comes. No one expects there to be an electrical fire and burns down their entire house.

I get it. I see claims every day. Just thinking out loud.

Oh no doubt.

I did a similar mental exercise with grandpa 10-15 years ago about how much $$ he has spend on cigarettes over a 40 year period (stopped smoking last 25 years of his life).

Just incredible amount of $$ spent on something like that over the years and if theoretically had invested that $$ in the market it's an insane amount of $ all for cigs.

txaggieacct85 said:

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redaszag99 said:

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I self insure on windstorm

House is paid off

MFers denied my roof claim after Harvey so I decided to wing it

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Does this mean you pay for fire insurance ?

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Yes, fire, theft, liability. It is like $1500 per year. I live in Galveston county and windstorm insurance is insane

So if one of your kids houses burned down would you eat the loss or them?

I have a good friend that's 37 years old. House built in 90s. He recently had a pipe burst while he was at work that caused 125k worth of damage to his house and personal property. I know that's a months salary for most TexAg users, but what about him? He's a normal guy. At 37 that can drastically change his future.

Not saying self insuring isn't a good option if you can afford it but you might talk to your kids thoroughly about it before you do

Casey TableTennis said:

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Roughly 50% of people have less claims than average.

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Rethink this one, lol.

txaggieacct85 said:

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In my 33 years as a homeowner I've had one "hail" roof claim.

In that same 33 years I'm aware of one incident in the Cypress, Texas area where I live of fire or catastrophic damage when a worker hit a natural gas pipe and blew up a home.

The most likely thing is wind damage during a hurricane which I why i prefer to live in Cypress vs areas south of Houston.

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I was buying an RV park and had an electrician come out to have a look at the electrical system. We got to talking and he mentioned he had 16 or 18 or 19 rent houses, forget the exact number. He told me that he dropped insurance on all of them because he figured he could lose one house every other year and pretty much break even (rebuild the house vs insurance premiums on all those structures). I think he said he had dropped the coverage 11 or 12 years prior.

I have been trying to remember back and outside the hurricanes (mostly water and not many wind claims) I never had a single tax client have a loss on their home due to fire or other destruction. I know someone who lost their house due to fire though. One person.

I heard one insurance company spent $2.5 billion

A house burning to the foundation is a rarity especially in newer homes

Exactly it's a rarity

You're example is rare and of course there is risk. Life's full of risk

And of course we would talk through the details.

Another option is to raise the deductible to a higher amount with a lower premium.

Of course homeowners insurance is a losing proposition for the vast majority of us. For the few that have a major event it's not a losing proposition

Personally, I feel very happy that I've never had to have a serious insirance claim on a house or vehicle. I don't buy insurance hoping to get my moneys worth from it, I buy insurance to shift risk from me to someone else.

If you own your home and want to take all the risk, I don't see why you shouldn't be able to take that option (assuming an HOA or something doesn't mandate you have it to be able to repair your home and keep the neighborhood nice)

If you have the money on hand to repair the damages I believe storm damage and such is deductible from taxes, over time. So that cash outlay has recovered to some degree.

Look at raising your deductibles significantly and reducing some of the add on coverage to more or less have disaster insurance (fire). Given the house is paid off, you're paying up for the episodic risk which is likely smart but not the premium coverage.

My father's wisdom on this topic is "insurance is one of those things you always hate paying for. But when SHTF and you need to use it, you are glad you did and have it."

Do I like paying higher costs? Not at all. But if you have a well-stocked emergency fund that's collecting nothing but dust and interest in a HYSA - why wouldn't you have insurance? Especially if you can lower the premium by "self-insuring" up to a certain amount 1-2% deductible, etc.

It's all a balance with how much you're willing to risk/stomach/roll the dice on vs paying to shift that risk on to someone else.

I've heard people say that they have paid for insurance all of these years and got nothing for it. WRONG! They bought protection and got it. I do not want to be the one who makes the claim. Self-insure only if you understand the risk and can afford to pay if your property is damaged or destroyed. Did you know that insurance companies buy insurance to spread their risks and losses? It's called reinsurance.