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Comment by djhworld | Hacker News Reader

The article assumes that everyone has a lot of savings tucked away for the "lesser" damages like floor flooding (which might spiral out of control once the true extent of the damage is revealed...)

It definitely makes sense if you've got a good emergency fund, but I come from a background of people where cash savings are limited and all their money is in the big purchases (house, car etc.) and work in minimum wage jobs

A £7000 floor flooding scenario would almost certainly put them into hardship without insurance...

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As someone whose floor was flooded, it did not cost £7000. It cost the insurance company £274,000, just to (badly) fix it, then a further £15k in compensation for everything they screwed up on the way, then another £100k for loss of value as a result of their contractors.

The problem with floor flooding is it isn’t the floor that was flooded. The floor is just a symptom. The whole house needs to be stripped and dried after a flood, during which time the house is inhabitable.

It's surprising how quickly costs can escalate. One of my neighbours flooded. During repairs they quickly discovered there was asbestos everywhere. I don't know what the costs were but they weren't back home for two and half years.

There’s a parallel to software here, somewhere. When you take out insurance against an event even if you think you could absorb it anyway, what you’re really insuring against is the costs you don’t foresee. I’m having a ‘build vs buy’ discussion at work which is surprisingly analogous.

I find this debate interesting, but I can see this argument being used by both sides. Is your point that you don’t foresee external issues by buying like the supplier going under/the product becoming unmaintained or that you don’t foresee internal issues by building like some critical security oversight?

It's an interesting discussion, for sure. I'm on the buy side right now, because it's an accounting solution, and I'm scared we don't know enough to build a competing product in a regulated space. We're more legaltech than fintech, so it feels like we'd be committing resources to the wrong place.

> The article assumes that everyone has a lot of savings

No it didn't. The article just gave an example of one financial situation (income + savings) and examples of potential loss events, and showed how to reason through that. It didn't assume that example applied to everyone.

The article is written according to basic principles in a way that it's pretty easy to apply it to other examples or in fact your own financial situation.

The article actually says that you should insure only if it creates financial distress. So, in the case you describe they should insure for the floor flooding eventuality but not for the dog ruining the carpet (as a cheaper example).

This is a great example of how poverty is a trap. You cannot afford insurance premiums, so you are stuck without insurance for situations you cannot handle.

As you earn more, and get room to save, you get the option to forego insurance.

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