Hacker News Reader

Comment by WalterBright | Hacker News Reader

A rule of thumb is you'll pay twice in insurance premiums than you'll get in payouts. Insurance is only worth buying if you cannot afford the cost of the disaster.

For example, I don't pay for collision protection on my car. I can afford losing the car. Over time I've saved far more in insurance premiums than the cost replacing the car.

The same goes for insurance for appliances, etc.

View on HN

Yep. One of the ways the rich get richer is when they can self-insure everything and invest what they would have normally paid in premiums.

That really isn’t true. The rich buy insurance like anyone else, they are even more aggressive about insurance with things like umbrella policies to protect their wealth. They also hedge a lot, which is just insuring through investing.

Maybe a better way to put it is that rich people have options. Of course if it's cheap for someone to offload the risk, they will. But if an insurer raises prices too much a people who can self insure will walk. Most people don't have that option so we continue to get squeezed with higher premiums and worse service.

Rich people will definitely have more options so they can walk away from bad deals.

https://finance.yahoo.com/news/charlie-munger-said-warren-bu...

Another way the rich get richer is simply taking their money and investing it.

Another way, theoretically, is to privatize/keep profits and put losses on the shoulders of taxpayers. I don't think such unethical activities are ever done in the real world, though.

That's exactly what subsidizing insurance in fire-prone regions would do!

That's just a BS trope. People who can't self insure either insure, or don't. And of those who don't some get lucky, some get unlucky.

If everyone who said screw it got unlucky the way the internet likes to make it seem then insurance as a business model simply wouldn't work at the price points it does.

What do you mean BS trope? Literally the king of insurance says to self-insure if you can afford it.

https://finance.yahoo.com/news/charlie-munger-said-warren-bu...

easy thing to say with 10 digits in your account!

You must have astonishingly high insurance premiums or a very cheap car.

I pay about 1 000 NOK (about 100 USD) per month to ensure my 2015 Tesla S here in Norway. It would take over forty years to get back the purchase price by not insuring it all and more like eighty if I were to merely drop the collision protection. And that's not even considering that they have paid out about 60 kNOK (6 kUSD) in claims for collision damage so far for this car (no other vehicle involved).

I pay around $120 a month for a Toyota 4Runner (much less expensive than a Tesla S). I haven't been in an accident ever and haven't had a ticket since around 2002. I guess it's just more expensive in the US.

But why should it be more expensive? Both the purchase price and repair costs should be lower in the US because of lower purchase taxes which should surely push down the insurance premiums. Or are collisions so much more likely in the US?

I'm not really sure. The US has to pay liability insurance which covers medical costs, which can be very expensive. I would imagine countries with socialized healthcare wouldn't have to pay as much for that risk.

Can you afford to replace the other guy's car?

Collision insurance != liability insurance.

Also AFAIK collision and total loss is required to get financing and for leases, so you still pay / there is still an opportunity loss in other forms.

I lease EVs with the federal tax credit and invest what I’d otherwise spend buying cash. You need to look very closely at the numbers for your own situations but it’s been a “better” deal than buying cash the past few cycles.

Sure, you could also just buy a decade-old Honda used, but then you get to drive a used decade-old Honda. It’s like suggesting that camping is cheaper than a hotel or that luxury hotels provide no additional value beyond budget hotels.

On the other hand, used Range Rovers depreciate so drastically that you can buy one less than a decade old for under $10k, just make sure to check insurance and maintenance costs and actually have it inspected before buying. The air suspension in particular is why you see so many “dropped” examples for cheap.

Average new car cost is $45,000. Liability minimums in many states are still around $50,000. Even if you're insured, there's a good chance you still won't be able to afford to replace the other guy's car.

Reply on news.ycombinator.com