If you’re like me you pay a pretty penny each month for insurance. Health, dental, vision, car, life, renters, it seems like the policies never stop. Although I don’t mind paying for the peace of mind, I’d be lying if I pretended I was excited about the expenses. This is why I have a goal to self insure many aspects of my life. Here are a few areas I’d like to cover…
I was a sucker for purchasing “extended warranties.” While I thought I was being responsible for doing so, I’ve come to realize that is hardly the case. Come to think of it, I can’t ever recall being able to take advantage of an extended warranty. This makes sense when you think about it. Take for example Apple Care. For $160, you get two additional years of coverage. Do you think Apple would sell Apple Care if their products typically failed within that time frame? Heck no they wouldn’t. They sell the policy because they know the chances of your device breaking down is highly unlikely, not to mention that it only takes one accidental dent/crack/chip to completely void the warranty. I’ve bought extended warranties on every Apple product I’ve purchased, but have never once had to use them. Next time I’m offered an extended warranty I will politely decline, knowing I have the liquidity to cover any repairs if need be.
Girl Ninja brought a 2005 Toyota Corolla to the marriage. Last week I was calling to get quotes to add her to my insurance policy. Since she owns her car outright, I toyed with the idea of not paying for the comprehensive and collision insurance. This means if she crashed in to another car, our insurance WOULD pay for the damage caused to the other vehicle, but it WOULD NOT cover any repairs necessary for Girl Ninja’s car. I “Blue Booked” the value of her car and saw it should sell for about $8,500. Although we have the funds to completely replace her car, we decided the small premium increase is worth it to add comprehensive and collision coverage. Once her car drops to around $5,000, then we will probably drop that coverage and self insure and damage that may be caused.
Right now I can get a $1,000,000; 20 year level term life insurance for about $30/month. I see that as a completely fair trade, but as I age my insurance premiums will increase, or even worse I may become ineligible for life insurance if I develop some serious health issues. This means I have 20 years to build up a large enough Net Worth so that my bank/retirement accounts become their own life insurance policy. If I have enough liquidity, Mrs. Ninja can rest easy at night knowing that even if I am uninsured, she will still have adequate resources to carry on without me.
That said, there are a few areas I will probably never self insure in…
It’s soooo cheap. I pay like $10/month for $30,000 worth of coverage through AAA. It’s honestly my favorite insurance because I pay the whole year up front ($120) and have the peace of mind knowing my place can get robbed at any moment and I will be taken care of.
While I hope one day to have a small fortune, I don’t know if I will ever be wealthy enough to self insure my medical expenses. For example, Dad Ninja got in a pretty gnarly motorcycle accident two years ago where he almost lost his leg. After multiple skin grafts, a muscle transplant from his back, two weeks in the hospital, a few months in a wheelchair, and two years of physical therapy he is finally getting back to normal. While I don’t know the total cost of this entire process (probably close to $500,000 in medical expenses), I do know how much the first night in the Emergency Room cost him…$94,000. That’s freakin’ crazy. He wasn’t in this small hospital for more than 12 hours before being transferred to a larger hospital, but he left with a medical bill of nearly $100k. Suddenly my health insurance premium doesn’t sound too bad.
There are about a billion other things one can choose to insure, self insure, or just flat out ignore. Homeowners insurance, umbrella insurance, ALIEN ABDUCTION insurance (it really exists!) to name a few. Are there any areas of your life you “go it alone” and self insure? Where do you ALWAYS plan to pay the premium?