Property Insurance?

All the different ways of solving the shelter problem. To be static or mobile? Roots, legs, or wheels?
Post Reply
NYC ERE
Posts: 433
Joined: Mon Aug 02, 2010 8:03 pm

Post by NYC ERE »

Should it be built into an ERE plan? For example, I assume that I'll settle down somewhere that my total outlay for land+house will be ~$105,000 including closing costs and any construction. If I build my own house, it's possible that the property will be worth something like 2.5x what I put into it. Assuming half of that outlay is building materials, it would therefore cost ~$50,000 (and a fair amount of time) to rebuild from a natural or man-made disaster.
Since having to spend $50,000 to replace the house would destroy almost 1/4 of my nest egg, is it worthwhile to buy property insurance?


photoguy
Posts: 202
Joined: Fri Aug 20, 2010 4:45 pm
Contact:

Post by photoguy »

Unless the insurance company has made a serious modeling error, it should be priced to make a profit (i.e., more than the expected loss). Therefore if you can self insure (and afford to take the hit), you are usually better off doing so.
The question to ask yourself is if the worst happened would you still be able to meet your lifestyle goals? If yes, then you can self-insure. If no, you should get insurance.


jacob
Site Admin
Posts: 15910
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

@Zev - Page 176 ;-)


NYC ERE
Posts: 433
Joined: Mon Aug 02, 2010 8:03 pm

Post by NYC ERE »

@Jacob ha ha! duh. this sort of answers the other thread i just started about self-insurance. do you carry HD dental?


HSpencer
Posts: 772
Joined: Wed Jul 21, 2010 11:21 pm

Post by HSpencer »

ERE, Chapter 6, para 6.6.2 (Insurance).
My home and property would cost approximately $350,000 currently to replace due to a catastrophic loss. I carry a homeowners policy with a $5000.00 deductible. This means I am not going to file a claim even for a new roof. I currently pay about $600.00 per year on the homeowners policy. Mine covers everything that a full homeowners policy does and the rate is based on multiple coverage of vehicles and home, the fact I have not filed any claims in many years, and the high deductible. I personally feel (sleep better at night) that the annual premium is worth the price.

I am not a fan of most insurances. I carry liability on my rides, and the above, on my home. I have a very very cheap converted Service member group life insurance policy on self.

Instead of insurances and extended warranties of most kinds (extended warranties are a big rip off) it is much better to keep funds on hand to cover your losses where at all possible.

@Zev

In your case, I would do a high deductible policy on your paid for home, and cover for fire, and windstorms. I personally have no flood insurance as I am about as high away from any pooling water as I need to be. If I was in a flood plain (think Nashville TN) I might think about that.

Of course if any financing is involved, you dance to the tune of the finance company.


jacob
Site Admin
Posts: 15910
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

I have no dental insurance. Dentists seem better at operating on a cash basis. In practical terms I do walk-ins taking it out of country or at least out of state.
For something like a root canal or a crown, this would be the obvious thing to do.


George the original one
Posts: 5404
Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Post by George the original one »

Quick back of the envelope calculation for typical homeowners insurance:
$600 per year * 25 = $15,000 at 4% SWR to pay the premium for 80-90% replacement value

vs.

Rebuilding home yourself plus replacing items lost = $50,000 (or more)
Seems obvious to me :-)


George the original one
Posts: 5404
Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Post by George the original one »

Also note that a significant chunk of the replacement cost is often related to building and zoning permits.


jacob
Site Admin
Posts: 15910
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

So if you're cost/utility curve is flat, that is, you can self-insure, only insure if the probability of burning down the house is >30%.


HSpencer
Posts: 772
Joined: Wed Jul 21, 2010 11:21 pm

Post by HSpencer »

Perils against one's property are a given. I also like the idea of compressing and lowering one's risk. Leasing or renting in the right area, and the lease or rental being well suited to your needs, is an option. Renter's insurance is fairly inexpensive if you feel you need it, or if your possessions are not of too much value, forgo the renter's insurance completely.

I have toyed with the idea of one day finding the perfect condo or townhouse, in just the right spot, a place where I would be happy to live. Aging plays a part, as you may not want the risks of property ownership later, or even sooner in life. Living in generic terms is a roof, a bath, a bed, and security and peace of mind. The more you wish to purchase and maintain, the more you have to pay. Getting rid of wants and looking closely at needs could make non-ownership very attractive. One could remain at a certain lifestyle without owning very many things or one's very own house. Some say "well I don't want to pay anyone rent all my life". The landlord's risk is built into the rent you are paying, so in effect you assume some cost on risk no matter what.

In my case, it would be much more cost effective and much less hassle to downsize into such a townhouse or condo at my age. What is keeping me away from that currently is privacy. I cannot see myself going to a window every I hear a car door close, or have someone watch me get out of my car and go into my apartment. If I am standing outside my front door, spitting and whittling, I would be rather uncomfortable knowing someone was watching me from some nearby window. Also, until I am unable to have my workshop and garden, and enjoy the other benefits of my property, I plan to just keep on keeping on as I am, irregardless of being able to relieve myself from owning property and being exposed to risks. One day, in the near or not so near future, I will probably wish I had made the jump sooner rather than later. (Downsized). It is really nice to be able to take "any" action personally speaking, whilst standing on one's front porch, or back deck, if you read my meaning!!!


Mo
Posts: 443
Joined: Wed Jul 28, 2010 1:35 pm

Post by Mo »

@HSpencer, like most people I've rented several places and didn't think too much of the rental experience until recently. I've also owned. I currently rent a condo in what seems to be a near perfect situation. The people are good, there is essentially no crime, all of the places have garages so you rarely see others coming and going outside, and the buildings are arranged so that your views are primarily of the nature preserves or the pond. The construction is newer (2001)and efficient. The landlord is responsive. Small gardens are allowed, and some folks have set up part of their garage as a workshop.
There's always going to be some compromise in a group living situation, but I've really been pleasantly surprised. My point, and suggestion, is start looking early and put a few years of research into it-- perhaps you can find a great place too.


Post Reply