- First Name
- Sherman
- Joined
- Dec 1, 2021
- Threads
- 29
- Messages
- 1,829
- Reaction score
- 1,883
- Location
- MIDDLETOWN, MD
- Vehicle(s)
- '22 Badlands ordered 12/17/2021 - Arrived 3/25/22
My wife and I have done a lot of work that many people would file a claim for. Then we had a tree fall on our house -- after we had paid $thousands to have all of the trees that seemed to be a threat taken down (lots of large dead ash trees). The one that fell appeared perfectly healthy. The arborist didn't mention it.Anecdotally, my homeowner's insurance paid for itself to the tune of about seven years' premiums after I'd owned the house three months (Broken hot water line in the foundation, $7K). Then at 4-1/2 years of ownership it covered another 30 years of premiums (Roof and pool damage from a microburst-induced hail event, $36K). I figure I've got another 17 years before USAA breaks even on me.
But, that's why it's not really a matter of "you vs. insurance", it's joining a shared risk pool. Some of us will win (lose), while others will lose (win). Without other policyholders to help spread the risk, USAA would've likely quintupled my rates to cover themselves.
The cost to repair the damage covered maybe 8-10 years of premiums (after we'd been paying for ~35 years). In fact, they were trying to give us money for non-existent damage! That was strange. I had cut up and removed the tree and they paid me $1,000 for that. So I certainly have no complaints about our ins co.
With any type of insurance, some people will have claims and get money back, some will be huge winners (jackpot!) but that doesn't alter the fact that overall, buying insurance is betting against the house, and there are far more losers (paid more in than they received) than winners. Financially, when possible, it's better to be self-insured. Of course most of us cannot be self-insured for auto/health/home. Vehicle repairs are borderline -- some owners can cover a major repair, others can't.
As you said, pooling risk is necessary for insurance to be viable. When done in a non-profit, or reasonable, regulated manner it is beneficial. Nothing wrong with making a buck. Unfortunately, with extended warranties, the profit margins are typically huge and the sales methods are often sleazy. People are led to believe that they are all but guaranteed to be a 'winner' when the opposite is true.
Pooling risk can be complicated. For example, there are areas of the country where it is common knowledge that houses are more prone to damage from: wildfire; earthquakes; tornados; floods; mudslides; hurricanes, etc. With some exceptions, people are fully aware of the risk yet choose to live there. Other areas have very low risk. Needless to say, those in high risk areas would like their pool to include those low risk locations, but should they be grouped together?
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