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Insurance: A Tax on People who are Bad at Math?
Was this policy a good idea too? Lauren is upset and angry that everyone is carrying on as normal and ignoring the fact that Lucy is dead. Len mends her broken shoe, and then offers her a lift to Worthing , where she had been heading for. Alan May 14, , 5: No lawyers needed for buying insurance. However, while running from the police, Len drops the paper which reveals which hospital she had been sent to, but he searches the internet and finds the location. A confrontation ensues where Billy managed to get Jay out of the flat to safety in Jase's van.

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When we looked at the fine print, by allowing your insurance to lapse, you open yourself to denial for pre-existing conditions. Everyone needs to make some type of plan for continuing health insurance, period. You can play with the plan, the rate, the deductible based on your current age and health, but the natural conclusion to life is death.

If you want to save some money, stop smoking. CanuckExpat March 18, , 6: Nice write-up and good points. You might be interested in this book excerpt about insurance: If the rest of the book is as good as that excerpt, I might be interested in reading it. Great Lakes Stash March 24, , 6: What about purchasing a whole life policy with built in dividends. Also if you die it pays. Not the worst thing ever. They often cap your earnings and the fees can be astoundingly brutal.

Very nearly the worst thing ever. Matt May 17, , 8: Here are links to two interesting legal alternatives to car insurance in Texas. But I thought you might find the possibility interesting. Brett May 23, , Mustache mentions, but maybe that would work. Auto insurance negotiates payments down aggressively as well in my experience. No one mentioned tax deductibility though.

Then you effectively have the healthy people subsidizing the unhealthy ones in any given pool. Almost forgot, keep in mind that you, I, and many readers are the ones reaping insurance company profits everyday. A corporation is just an entity to make money for shareholders by satisfying some consumer demand. Often they are people just like me and you, though the wealthy people certainly control more capital than middle and lower class people overall. The more that this sort of living becomes popular if it does the more companies will cater to it by offering more products like bike trailers, high quality low cost groceries google Aldi , kits to repair your electronics google iFixit , etc.

Money Mustache May 23, , 3: Your point about health insurance being tax-deductible for those of us that own our own small companies is a good one. Money Mustache health insurance. Josh Triplett June 22, , 3: I agree with your post: And I plan my next laptop purchase to coincide with the warranty expiration date on my current laptop, so that I can always count on having my computer working. Laptop warranties, unlike most forms of insurance, charge everyone exactly the same amount regardless of risk.

So, the person who occasionally checks their email and browses the web pays the same amount as the professional computer user.

By the end of its lifetime, each of my laptops turns into the Laptop of Theseus: Counting both the cost of these components and the cost of the labor involved in performing these repairs, the warranty pays off after about 1 significant repair.

And over the lifetime of the warranty, I will typically require a couple of repairs per year. Money Mustache June 12, , 3: Sarah July 3, , 7: I would never go without good health insurance on my husband, because as you say, he is riskier than he looks. Luckily he usually has insurance through his employer. Alek July 26, , 1: I consider myself fairly financially savvy but I have been trying to educate my fiancé and your blog is MUCH better at explaining why we should invest in index funds, why a used car is better, how credit cards work, etc.

I have a specific question about auto insurance if there is already a post on this that I missed I apologize. As you say it is required to carry liability- so how much should we get? What about the medical aspect? I guess I should know if my health insurance covers that aspect but am still covered by parents until I am going to do some independent research but would greatly appreciate your insight and expertise.

NW August 14, , Your blog is my bible! I need opinions on long-term care insurance. Am I falling for the fear trap? What are your opinions? Charlie August 28, , 6: I like the blog and enjoy all of your articles, but this particular article I feel contains very dangerous advice.

Insurance is actually an instrumental tool of society in which risk is allowed to be pooled and can be mitigated for very small amount. Yale finance professor and economist Robert Schiller look him up agrees.

No life and health insurance combined with you getting cancer and dying leaves your wife not only broke, but likely bankrupt or in debt along with her having to provide for your children. Are stats going to protect you from that? Let me put it to you this way. Because statistically you are likely to win right? But I do not have life insurance, because having me die would just make my wife and son wealthier — they would keep all our investments, but have one less guy raiding the fridge and buying stuff.

Clemens September 10, , In terms of a statistical distribution function, buying insurance lowers the mean of the distribution but also makes it much more narrow.

So when buying, say, flood insurance, I lose money on average, but I gain a cap of what I have to pay should my home get flooded. Craig December 11, , 7: If people who buy insurance are bad at math people who buy lottery tickets are totally mathematically challenged! Money Mustache December 12, , Yeah, that would be a polite way of putting it. This article makes him come across as someone you would actually get along with although other MMM converts who originally followed DR will know better: CALL February 14, , 6: Really read those terms and conditions.

Every decent credit card automatically provides a lot of insurance. Bought a plane ticket? Free life insurance if a common carrier kills you! Ordered something that never showed up or came broken? The card will cover it — insurance! KF October 1, , 7: Just found the blog a month ago and working my way from the original post so please forgive the delayed comment.

I think I am going to call and try to negotiate a policy or just the AC and central heat. CALL March 23, , 4: The insurance companies know a lot about likely hood of repair, and costs of repair — at least in aggregate. They make money by taking in more than they pay out, either because they use fine print to refuse to pay, or they know how often a given policy will demand payment, and budget for it. Michele March 25, , So, my husband and I just switched insurance companies for about the millionth time is the last few years you can almost always find a better price every six months to a year by being a new customer.

Seeing as we are planning to retire in a bit of a different way than most people young and living without a stable home base we thought it might not be a bad idea to talk to them about different financial options.

Max Schneider June 12, , Alek June 12, , I might accept the odds for enough of an incentive, one that sets me up with FI for the remainder of my life. It also depends how many chambers there are ;.

Money is just money, whereas time spent living is priceless. Good hypothetical question, because it plays fear against statistics and logic just like we all have to do when making insurance choices. As a year-old just getting started financially, I would surely accept that bet.

With chambers or less, only a desperate person would probably play the game. With a six-shooter, Russian Roulette is always ridiculous unless you play it to avoid an even more certain death. Insurance is a little different though — the consequences of not having it are only financial, not brain-splattering. On the other hand most people could simply get a new one — or in case the stash is too little they could get away with a used hand me down for the time being.

JBS July 20, , Social Security is insurance as well. One must read policies closely as the insurance companies are fully aware of these benefits and sometimes will only pay benefits for costs Social Security does not cover. You can see estimated benefits by using the quick calculator at the Social Security website. You can use these monthly numbers to either reduce or eliminate your requirements for life and disability insurance.

My father paid for part of college using such benefits after my grandfather died. Rema August 7, , 8: My husband became eligible for employer-sponsored dental insurance for the 1st time 4 months ago. When I compared our spending last year to our projected spending this year we all fairly fanatically get twice-yearly cleanings, the kids need sealants, and we also have orthodontic expenses and 2 minor dental surgeries that are needed , and after I made sure that our regular dentists would accept the insurance yes, yay!

My advice would be to carefully evaluate any insurance plan you are offered based on your own real-world numbers. Joe August 20, , 8: Carrying a term life policy to secure the goals I have for my family on both my wife and I is one of the best things I feel like we have done.

The amount I spend a month in life insurance to fully guarantee that either of us would be financially independent without one another in the unlikely event of a premature death is far less than the pain and strain that one of us dying would have on the other. I vehemetly disagree with your assertion that insurance in all forms is a tax on people bad at math. I have life insurance because our current budgetary and obligatory constraints mandate that we have it.

I have it to lower my budgetary variance in unlikely event that something tragic happens. Money Mustache August 20, , 9: I understand your point, Joe.. By far the most likely outcome of skipping insurance, is an instant and permanent boost in your wealth, reducing your need for any form of insurance and increasing your security every single month. The second point is on the role of hardship in our lives.

Sure, a life insurance payment might protect a survivor from financial hardship — from having to work harder to earn their own money. But is such hardship something to run from? Just like some of us have to earn our own money when reaching adulthood, and others get it handed to them as a trust fund.

Does the self-made person lead a less fulfilling life because of the added hardship? JL March 24, , The principle behind insurance is the same as the one behind investing in index mutual funds instead of individual stocks.

By investing in a single stock you could have great gains or great losses or anything in between. By investing in an index mutual fund, you narrow the potential range of losses or gains because the gains and losses of individual stocks cancel out to some extent.

Not carrying insurance is like investing in a single stock. Insurance is, in essence, combining your individual stock i. So then, why do you recommend only minimal insurance, while recommending mutual funds?

This seems like a contradiction. Money Mustache March 25, , 9: Insurance has a relatively high inefficiency the operating expenses and profit that the insurance companies keep for themselves. If you self-insure for things that have a relatively low cost cars, watches, higher deductible on your house, etc. For people without many millions, health insurance is still a worthwhile investment for exactly the reasons you mentioned. Nathan February 21, , 6: As the comment above points out, you are risk pooling in a similar manner to a mutual fund.

The profits then come from investing those premiums until the losses need to be paid. There are, of course, losses happening every day, but premiums are coming in every day as well. That allows companies to have a decent amount of your money growing to keep premiums low. It is not for everyone in every situation, but you are painting with a very broad brush.

Paul February 21, , Buying insurance is not analogous, under most circumstances, to investing. Insurance shifts risk from one party to another. One buys insurance so that the risk of loss is shifted to someone else.

If an insurance company is run efficiently, and risk is priced correctly, the return during the float period provides a better return compared to some alternative use of the capital. When you buy insurance you are simply betting that if a loss occurs during the policy period you are better served financially if someone else has to pay the loss. Only you can make the decision to make that wager based on your own individual financial situation. However, as MMM points out, in a lot of situations, the risk of loss is quite low and self-insurance is the better long term wager.

For instance, it might be perfectly rational for a young healthy person not to carry health insurance, despite our government making it unlawful to do so. Mack February 21, , 3: I think a broad brush is perfectly permissible here. Any insurance not mandated by law is a statistically great way to separate yourself from hard-earned dollars. Those potential investment earnings are absolutely included in what that insurance really costs.

Any company that can afford television commercials is making a TON of money. Nathan February 22, , 7: Of course the premiums are based on what they believe they can make on investments, that was not my point.

Sans investment income, auto insurance is not profitable. And while I can afford the loss of my vehicle, the payout since I have low premiums due to less driving is MORE than I could get on investing the difference in collision premium in compounding interest over the next 10 years.

Will you come out ahead with insurance? Will having insurance break the bank for a Mustachian or ruin their chance to retire early? It can, however, prevent a several hundred thousand dollar loss from ruining your financial independence. The minimal cost is worth it to many people. You may have failed to notice, however, that many of the top rated insurers do not.

Mack February 22, , 9: Again, drawing a line between money spent on premiums and potential investment income given to the insurer is fallacy. As you say, statistically you will not come out ahead, so why purchase the insurance?

Anyone is welcome to insure all they like — I understand risk aversion. But the people who act as their own insurers in these cases will statistically end up wealthier. Mister Shankly August 22, , 8: MMM, love this article and the discussion it has stimulated.

I live in southern California where there is a higher, yet unpredictable likelihood of earthquakes. Consequently, I have purchased earthquake insurance as I statistically see a greater possibility of one happening now since we are long overdue. My current stash allows me to self insure up to the deductible amount but not the full replacement cost without depleting a significant amount of the stash. I plan on building up a separate fund for the replacement cost of the home in a conservative mutual fund and then canceling the insurance once this is done.

However, I do the math on the cost of insurance premiums over the next 40 years plus the deductible roughly adjusted for inflation and it comes out to be a better deal than self-insuring the entire rebuilding amount.

Am I delusional on this or is earthquake insurance still a better deal even with its ridiculous deductible? Money Mustache August 23, , Some comfort would be had by looking at the other big earthquakes and what percentage of the houses they fully destroyed.

And in Southern California, where outdoor and indoor weather are identical, you can have a much smaller house and live more outside, which saves replacement cost as well.

Linda August 22, , 1: Mr Shankly — this is a late reply — I have personal experience of an earthquake here in Christchurch, New Zealand in The main damage to our house was that it sunk quite markedly into the ground due to liquifaction look it up! We spent 5 years in communication with our insurers, and in the end had to use a lawyer to help us get a settlement.

We were paid out in cash, and we are planning to rebuild at a time when it suits us. Due to the nature of the land the house is built on we need to have foundations that will withstand another quake — this is much more expensive than the standard foundation it was originally built on. Christchurch was built on a swamp — lucky us! We are very grateful that we were fully insured, but some others in this city were not so lucky — they are left with houses that they cannot afford to repair as they were not insured — therefore they can only sell for a much reduced value.

Lee Hayward October 19, , 6: MMM, in the UK, the insurance companies are weird. We have a concept called 3rd party, 3rd party fire and theft and comprehensive insurance. I went to a price comparison website and tried looking for 3rd party car insurance. So in the UK, it seems the insurance companies think you are a lower risk if you ask for comprehensive insurance??!! Everett October 29, , 1: We have a similar phenomenon in the USA.

Each state requires a different amount of liability insurance. Liam G December 3, , 7: First was to switch cell phone providers from VZ to Republic. Next was the cable bill Comcast: Sarah December 12, , 1: You have found that prices are negotiable. I called and spoke to someone asking for the price to be reduced — I pointed out that my relative takes almost no medication and that what she does take is very cheap. My response was, in total, this: Saving money is great, but not being taken advantage of is the spur for me to negotiate prices that are made to appear set in stone but of course are not.

Jerry May 8, , 7: I really like the blog. This is the first blog I every really have read or commented on. You give a different perspective on a number of points. I happen to already do a number of the same things. One is health insurance, where I purchased a high deductible plan. Another is Life Insurance—no brainer.

Most companies especially larger one do exactly what you are talking about. They call it being self insured. Companies basically pay themselves the premiums setting aside the monies for when various incidences occur. It can be also very important as many people will have one life event where they can not work for an extended period of time. Money Mustache May 9, , Alan May 13, , 8: Hello MMM, just started reading the blog recently, and already a big fan.

I happen to work at an auto insurance company, and in my daily job I get to speak to people involved in auto losses, and read through claims reports. So, I am constantly exposed to insurance, and super aware of accidents, and thus I carry high liability limits.

Exceedingly high liability limits. But I would like to hear your take on it. Most states have a minimum level of liability coverage that is required on an auto policy. All your assets are now on the table; savings, home s , stocks, retirement savings, car s , and future earnings. Have I seen cases where the payout easily exceeds state minimums? Not every day, but more times than I would like. Would I recommend everyone get the highest limits they can?

No, but realize that a single bad accident can quickly siphon away hard earned savings. I am a good driver, so is my wife. We would be fine with a lower coverage. I know it is a numbers game, but I see the results of people who lose that game every day I go into the office. So my question for MMM is, What limits do you have on your liability coverage?

Are you going to consider changing them after this post? JBS May 13, , 9: Alan May 14, , 5: For businesses, there are actually commercial policies available that work with that knowledge in mind. Basically, it is a deductible for liability coverage. Those options are really affordable, compared to plans that pay for any loss.

Probably not, based off my driving history, age, gender, martial status, credit score, blah blah blah. But they are called accidents for a reason. I just want to make sure that everyone realizes that the jump from basic state-mandated coverage to some actual coverage is not too different. In most every state, you are going to have to pay insurance. Why not pay for something that covers your ass sets.

Andrew April 22, , 9: Brikenjon July 19, , 8: That puts us past the break even point before even including my wife. They may be able to be retrained into a different type of work but likely none of their specialized skills will apply, so their wage will drop drastically.

Maybe they can consult for our industry, or be a greeter at WalMart, but that is about it. So I realize my job is high risk, but I feel I am compensated fairly for it.

It is relatively cheap since I bought it so young. I used NorthWestern Mutual which is a company that pays annual dividends to policy holders. The dividends tend to go up each year, which means in effect the premiums go down each year. The policy pays me until 65 if I become permanently disabled.

This is based on direct observation of co-workers and information from my union. I think the Insurance company has greatly underestimated the risk to those people in my field and should probably exclude us from their policies, but as of yet they do not so I take advantage of their ignorance. I wonder what job in earth is so important that keeps the worker wondering day after day about whether they will be able to walk on their own legs when retired?

I think that a job with that high risks for 90k a year without any employer paid insurance is complete madness…. We all make choices and tradeoffs in this life. There are a lot of people who work deadly jobs for less money than me.

My friend works on windmills for windpower he has 2 co-workers who have died from falls and he makes less money than me. My entire lineage came from mining and every decade or so there would be an accident where several miners died, and they made less money than me not to mention chronic health issues from working in the mines. I have many friends in logging who make less money than me and their lives are on the line every day, one of the husbands of my friends is paralyzed from the waist down from a tree falling on his legs and he is lucky to be alive.

One of my other friends is police officer and her life is on the line every day. Many of my patients work in a factory where people die or are permanently disabled every year. I have countless friends who have served in Iraq and Afghanistan who make much less money than me and their lives are on the line every day. I come from a very blue collar socio-economic background. I count myself among the lucky to enjoy a comfortable wage working indoors in a climate controlled setting with acceptable bodily risks.

They do have all these fancy stuff, but when you think of it, why do you need it for? In here, we have mandatory car insurance for each vehicle on the road which pays for the other halfs bills and medicals in case of a bad crash, you can also get a full insurance which covers your own bills also.

You drive a car worth of couple thousands for a reason, so burning down is not a worlds end what is the chance your car burns down if you maintain it regularly anyways? Now lets see about that, when I drop dead or go to a caring home being a veggie, what does it matter to me who gets the house?

My parents and rest of my family live over km away having apartments of their own, my maybe-future-wife is able to keep living in the apartment because the law says she can keep paying the mortgage in my behalf. So no real reason to pay several hundred a year for this. Maybe the lowest cost of insurance if flying far abroad, one that covers costs of an unfortunate hospital stay or medical airplane transfers back to homeland, etc.

Also, many employers and other associations offer this one free in return of membership, which you may need anyhow. Trying Baddassity from China September 26, , 3: We pay in less than 20, by the time she is 18, and it will be good for , throughout her life until she can cash the full , in at age A series of Invisalign aligners are custom-made for you, to move your teeth in the sequence determined by your doctor. Each set of aligners is worn for about two weeks before moving onto the next set of aligners in your treatment plan.

It is recommended that you wear your aligners for hours per day and only remove them for eating or drinking, brushing and flossing. Invisalign aligners may temporarily affect the speech of some people, and you may have a slight lisp for a day or two. However, as you get used to having aligners in your mouth, any lisp caused by the aligners should disappear. Cost is always a concern, and only your doctor can the exact price of treatment. In most cases, Invisalign treatment is comparable to the cost of traditional braces.

Because medical benefits differ from policy to policy, you should review your personal coverage plan and check with your insurance provider. In general, if a patient has orthodontic coverage, Invisalign should be covered to the same extent as conventional braces. Invisalign was developed with orthodontists and used in dental practices worldwide. Patient Resources Important Information for your visit.

Your appointment time is scheduled exclusively for you. If this time becomes inconvenient, we will gladly change it. In this instance it is courteous to give us hour advance notice. This allows us time to schedule another patient who may be in urgent need of care.

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