Hacker News Reader

Comment by monster_group | Hacker News Reader

At this point, I buy all insurance (home, auto, health etc.) with highest deductible and lowest premium knowing that there is a high probability that insurance will not pay (or pay only partially). I mainly buy insurance to avoid catastrophic losses and hope that, if such an event were to happen, they would cover the loss at least partially. For smaller losses I am willing to absorb the loss and save money on premium every year. The money saved on premium can be used (to some extent) to cover the loss of the denied claim. Also, in the event of a loss, having high deductible discourages me from filing claim which keeps premium low for subsequent years.

View on HN

When me and my wife were purchasing our first home, we had everyone from mortgage people to realtors to our own friends and family that owned homes tell us to never use our home insurance unless it was something truly catastrophic.

Currently our home insurance deductible is $10k. The logic is that anything less than that we can pay ourselves. Home insurance is only there to cover either catastrophic damage or really, a total loss.

We 'pruned' our coverage and put the savings into an account labeled 'self-insurance'.

What do you consider catastrophic loss? I’ve found in home insurance the delta on lower deductibles isn’t that meaningful and when something happens, the pay out is almost always worth it. Something like water damage from a burst pipe can be 20-50k very quickly, and having to pay a 10k deductible is quite a big hit in addition to the remediation needed.

By catastrophic loss I mean an event that has the potential of causing bankruptcy (such as house burned to the ground). Home insurance rates vary a lot depending on where you live so our math is likely very different and we both could be right. While a big expense in one shot definitely pinches more, paying higher premiums every year, the annual premium hikes, in addition to raised premium for subsequent years due to filing a claim can also add up to a lot surreptitiously.

Total loss being the bar seems crazy to me. A 20-50k unexpected expense for almost everyone would essentially result in bankruptcy or at minimum insolvency and long term debt.

That means you would need to hold enough money in short term accessible money (HYSA, etc) to self insure in that scenario, which is unachievable for most people.

Insurance should set a maximum cap to your pain no matter the circumstances… and I think the pain being >50k is quite unreasonable unless we’re talking about property that is worth in the millions.

Your point is perfectly valid. There is no single right answer. It just depends on what risk level one is comfortable with and that varies from person to person.

I’d agree there’s no single right answer, but I think generally a risk profile for an insurance product that is so outsized against you seems like a poor decision.

This isn’t like putting all your money in meme stocks or something, this is more akin to selling risky stock options. The downside potential is massive and essentially uncapped, whereas the upside potential is meager.

Downside is not "essentially uncapped". That would be the case if I did not have insurance. I do have insurance - one with high deductible with a fixed maximum loss that I am willing to accept should such an event happen.

Wise economically.

For things you can cover, external insurance will be more expensive than self-insurance because you aren't paying for random CEOs. (Unless you've captured some and are tending to them)

That is how insurance is supposed to work. It's not meant to cover everything. Only the things that are hard to pay.

this exact behaviour is why insurance is getting more expensive

Reply on news.ycombinator.com