Has anybody dropped their auto insurance or home owner's policy to save money?
Question:
I would like to hear your comments.
Answer:
Hi again, your friendly insurance guy again. :)
Plenty of people drop their insurance to save money. Is it a good idea? That depends.
Each person's situation is different. Some people have the financial means to self-insure. Insurance is something a consumer purchases to push risk away from himself or herself. If you have the means to recover from any loss, no matter how severe, you probably don't need to insure against it except as a convenience.
The thing to keep in mind, however, is that the real risks consumers should use insurance to push away from themselves are the BIG risks, not the small ones. Health insurance, for example, is at its most powerful as a ward against the risk of having to pay for the expense of severe, long term, debilitating types of illness that cost incredible sums of money, like needing dialysis for the rest of your life, for example. Sure, it's nice to have the $25 co-pay instead of the full cost of the checkup, but that's not the real risk health insurance is protecting you from. Having to pay for a few checkups a year probably won't render you a financial wreck. Paying for three years of chemotherapy might.
In the end, what it boils down to is this:
Most people will never be in position to need the full benefits of the insurance they purchase, and that is a good thing. That's not nexessarily a reason to cancel it. People DO get cancer. People's houses DO burn down. People DO get into car accidents and get sued for millions of dollars. Ask yourself if you're prepared to look yourself in the mirror some day and say:
"Well, I guess I was wrong, it actually COULD happen to me."
Or worse, to your family:
"I'm sorry, I was wrong, I wish I had kept the insurance but I didn't."
As a person in the industry, let me tell you: Occasionally the phone rings at the agency and that second guy is on the other end of the line and the conversation goes like this:
"Can I get the insurance back so it will save my family?"
And then one of us has to try to figure out how to tell someone who's going to die that there's nothing we can do to help him any more. You have no idea just how awful it is to get that call.
So yes, you can cancel your insurance to save some money. Please decide if the risk you take by doing so is the right choice, and choose wisely. If you have the means to self-insure, by all means make whatever choice you wish. If not, be cautious and consider the wisdom of erring on the side of discretion.
If you don't have a Mortgage you don't need homeowners insurance, you are totally within your rights not to insure your home. Although personally I think it is a bad idea. There is way more to insurance that just rebuilding you home after say a fire. Things to consider, liability, additional living expenses etc.
As for auto you are right some states allow you to prove you are financially responsible which means you would need to have approx 2 million dollars available at all times to pay out in the event you are found legally liable for something relating to an auto accident. That's after lawyer fees.
Insurance is a good deal financially when you need to use it. Even if you do have 2 million dollars in the bank that you don't need to touch EVER, wouldn't you rather keep it there and let the insurance company pay your lawyer, medical and settlement bills if the need arises?
I have no mortgage, and choose not to buy flood insurance for my house, which IS in a flood zone. I DO carry homeowners insurance, because one of the coverages on it is liability coverage. Without liability coverage, I could lose my home if I'm sued - even if I end up winning the suit - because of attorney fees.
I don't have loans on my cars, but choose to insure them, because I live in a major city, and they have some value. If someone else hits me, I don't mind paying the insurance company to do all the claims handling & tracking them down. Also, (sigh) I have a 15 year old son, and EXPECT that we'll have an at-fault accident in the next couple years.
I wouldn't drop home or auto insurance. I have dropped medical coverage. I discovered I was paying more in premiums every month than I've spent on actual medical costs in a decade. Putting the premiums in a mattress for that time would have given me 1/2 a years income by now. I recommend other investments, but I think the point is clear.
Yes it's true, some states allow you to prove financial responsibility. That means that you will have to have that money put aside in the event of a loss. Do you have $50,000 laying around you can put in an account for "just in case"? Insurance is bought to protect you and others. Let's say you have an at fault accident and injure someone so badly they can never work again. Just because you don't have any assets, don't think they can't come after you for payment. They will put a lien on everything you own presently and in the future. Now say you have an accident that's a not at fault and now YOU'RE the one that can never work. Who do you think is going to cover your life? Insurance seems like a waste, basically you're buying a piece of paper in hopes you'll never have to use it.but if you ever do, it will cover you, your car and everyone else out there like me that buys insurance. Get a policy..it's worth it.
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