Would you go bare? (living without insurance).

[marylander1940]

In some rare cases being self-insured (going bare) could be a legitimate option if the land is worth more than the house itself. A friend just told me this and I felt I had to share it.

How likely that is... that's another question.

[+ PhileasFogg]

On 10/18/2024 at 2:51 PM, marylander1940 said:

In some rare cases being self-insured (going bare) could be a legitimate option if the land is worth more than the house itself. A friend just told me this and I felt I had to share it.

How likely that is... that's another question.

It’s not unusual at all….but it’s also rare that the building doesn’t provide any incremental value at all,   That is, if it’s habitable and not condemned.
 

As stated, the land being worth more than the building “tips” at 51% land, 49% building.  So, an uninsured loss would be 49% of value in that case.    

I believe the maximum residential limits for federal flood insurance are $250K for structure and $100K for contents.   So, in a coastal area, “the land exceeding the building” is the norm and not the exception.   But, people who go bare AND have the money won’t care 

[+ ApexNomad]

That’s a really interesting perspective, especially when you factor in the coastal areas where land value typically dominates. I wonder if there’s also a balance between the cost of premiums and self-insuring that people consider, especially for those with enough assets. It’s one thing to go bare because you can afford to rebuild, but I imagine there’s also a strategic component, where some may prefer to invest what they would spend on insurance premiums elsewhere, betting the risk is worth it. It all seems to come down to how comfortable someone is with the level of risk they’re willing to carry.

[+ PhileasFogg]

On 10/24/2024 at 5:53 PM, ApexNomad said:

That’s a really interesting perspective, especially when you factor in the coastal areas where land value typically dominates. I wonder if there’s also a balance between the cost of premiums and self-insuring that people consider, especially for those with enough assets. It’s one thing to go bare because you can afford to rebuild, but I imagine there’s also a strategic component, where some may prefer to invest what they would spend on insurance premiums elsewhere, betting the risk is worth it. It all seems to come down to how comfortable someone is with the level of risk they’re willing to carry.

I suppose it’s all about timing. If I decide to cancel insurance tomorrow and the disaster happens next week, then I spend a decade “earning back the loss” by not paying premium.

Many businesses go through the complicated task of self insuring health benefits or joining insurance pools for loss share on fixed assets.  Typically, the breakeven is about 3 yrs.  
 

That’s not particularly risky.  But I’m guessing a consumer break even on home insurance would be forever.  Right now, the cost of my home insurance is about 1/2% of the value of my home (less land)…my coastal home(at 20’ elevation), the cost is 2% of the value of my home (less land).   I won’t be here long enough to enjoy that breakeven (which isn’t indexed for inflation). 

Edited October 26, 2024 by PhileasFogg

[+ ApexNomad]

3 hours ago, PhileasFogg said:

I suppose it’s all about timing. If I decide to cancel insurance tomorrow and the disaster happens next week, then I spend a decade “earning back the loss” by not paying premium.

Many businesses go through the complicated task of self insuring health benefits or joining insurance pools for loss share on fixed assets.  Typically, the breakeven is about 3 yrs.  
 

That’s not particularly risky.  But I’m guessing a consumer break even on home insurance would be forever.  Right now, the cost of my home insurance is about 1/2% of the value of my home (less land)…my coastal home(at 20’ elevation), the cost is 2% of the value of my home (less land).   I won’t be here long enough to enjoy that breakeven (which isn’t indexed for inflation). 

You make a great point about the timing and long-term implications of insurance. For businesses, self-insuring or joining pools makes sense, especially with a three-year breakeven. For homeowners, especially in high-risk areas, the costs can feel disproportionate to the benefits, especially if you won’t be in the home long enough to see a return on investment. With inflation affecting home values and payouts, it adds another layer of complexity. Ultimately, it’s about balancing peace of mind with financial reality.

[marylander1940]

Florida couple saves $100,000 after deciding to 'go bare' by not purchasing wind and flood coverage

https://youtu.be/zCZBA2k5Ey0

[+ Vegas_Millennial]

When I was younger and still getting myself established, I went without Umbrella Insurance.  Now that I have some assets, I won't go without Umbrella Insurance.

[handiacefailure]

Suze Orman talked about it recently on her podcast and it could make sense in their case for homeowners in some expensive areas like Florida.   She said their condo insurance for their florida condo would have been over $20K a year and they decided to self insure.   With a condo you only insure the walls in as well, and my condo insurance is only about $400 so not woth it, but am thinking of dropping collission/comp. on my car next year and self insuring.

Umbrella coverage, no way in hell would I self insure if I had any assets at all.   My sister was killed in a car crash last year and her passenger survived but had to have surgery and was off work for a couple months and is still only able to work part time since the job requires standing and he's suing and my parents have decided to sue for wrongful death (they didn't want to profit off her death but this is really taking a toll on their health), so that's made me really realize how improtant it is to have that coverage

[handiacefailure]

On 2/24/2025 at 9:24 PM, Vegas_Millennial said:

When I was younger and still getting myself established, I went without Umbrella Insurance.  Now that I have some assets, I won't go without Umbrella Insurance.

It's cheap protection.   It's billed monthly with my auto insurance and is only around $18 a month for a million dollar policy.   With state farm though, they did require me to raise my limits on my auto insurance from $150K to $250K for liability.     My sister was killed in a car crash last year and between what her passenger and my parents are suing for, $250K wouldn't come close to covering the expenses.   

[Lotus-eater]

On 2/24/2025 at 6:24 PM, Vegas_Millennial said:

When I was younger and still getting myself established, I went without Umbrella Insurance.  Now that I have some assets, I won't go without Umbrella Insurance.

You buy home insurance to pay for damage to your house, car insurance to pay for damage to cars & people, and medical insurance to pay for medical treatment, so you buy Umbrella insurance to pay for a damaged or lost umbrella? You must have a fancy umbrella.

Edited February 27 by Lotus-eater