A Bit Less for Luca

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Insurance against potential damage usually costs more in actual damage – to your wallet.

The insurance company is betting on this being true. Insurance – from the perspective of the insurance company – is all about not paying but being paid.

By you – to them.

The scales are most unevenly tilted for the responsible, who rarely – if ever – file a claim for damages caused by themselves.

The secret being that most claims are not the result of an angry and capricious Zeus who without warning jerked the steering wheel hard left and caused the car to veer off the road but rather the consequence of an inattentive or inept driver. Those who are neither rarely have what are styled “accidents.”

For them, insurance is an very bad deal – one that involves annual payments made for harms not caused which, over decades, can easily add up to many thousands of dollars that could have been spent on something of actual benefit to the responsible person who worked hard to earn those dollars.

Things like doctor bills – which many people can’t afford because they have paid so much for insurance instead.

Which is why, of course, the responsible – who are also usually bright – have to be forced to buy insurance. No one who’s not stupid says yes to a bad deal if they don’t have to.

So they are made to.

But, there are still legal ways to limit the extortion – which is what forced insurance is, by definition. As unpleasant as that non-delusional definition may be; the truth, as the saying goes, sometimes hurts – especially when it involves facing up to our own powerlessness before the extorter –  who has the backing of law, some thing much more potent than a thug’s gun in the small of one’s back.

The first such way is to always pay cash for your car – so you can skip paying for “collision/comprehensive” coverage, since you’re still free to assume the risk of physical damage to your car. If there is a lien on your car, the lienholder – rightly – obliges you as part of the lien to cover the risk of damage to what is still functionally his car, no matter whose name appears on the title.

But if you are the sole owner, you can say no – ah, the feeling! – to insuring against physical damage to your car. Which is a very smart thing to do if the car is worth less than $10,000 since anything more serious than a very minor fender-bender will almost certainly result not in the car being fixed but being thrown away (i.e., “totaled”) due to the fix-it costs which attend owning a modern car, especially one with air bags.

Most people do not realize how catastrophically expensive air bags are to replace when they deploy. The driver and passenger bags take the steering wheel and most of the dashboard with them when they deploy – and the typical fix-it cost for that alone is often several thousand dollars. Before any bent bodywork has been fixed.

If the car is worth $10k, $5k in fix-it costs will usually total it.

It’s true, the insurance company will give you a check – but it will not replace the car because it is guaranteed to be for an amount less than the car was actually worth to you – leaving you to pay the difference it will take to replace it with an equivalent car.

You are better off putting money in a mason jar – and counting on the car not being totaled. Which – assuming attentiveness and competence behind the wheel – is likely not to happen. You will now have money to fix for fender-benders out of pocket (mason jar) too.

Which brings up the second way to limit how far Luca shoves his hands in your pockets (as he shoves a gun in your back).

It is to buy no more than the bare minimum required liability coverage which the state forces you to buy. You can say no – ah, the feeling! – to hysteria-hyped additional coverage based on actuarial tables which (again) assume the worst and which worst is rarely visited upon the responsible and prudent, the careful and competent.

If you never cause (italicized to emphasize the point – and to point out who gets sued) an “accident,” then you will never be liable for any damages.

So why pay for them?

Sure, it’s possible in a moment of inadvertence you might cream a toddler who wandered into the road and be sued into the poorhouse. But how likely is it?

Calculate the odds of something like this ever happening vs. the certainty of paying say $150 dollars more each year which you didn’t have to.

Now add it up.

Over the next twenty years, that comes to $3,000 – a tidy sum. It’s enough to put a new transmission in your car, which is something you might actually need – and which you now have funds to pay for.

Got a question about cars – or anything else? Click on the “ask Eric” link and send ’em in!

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23 COMMENTS

  1. re: Luca Brazzi. At least with the MOVIE “Luca”, you get “difficult issues” handled w/o fuss (for you) and when your daughter is married off, his benediction that she’ll bless you with many grandchildren, and the “foist” one will be a male child.

  2. Another thing you’ve got to watch our for: Uninsured Motorist Coverage.

    If insurance in MANDATORY why are there people out there without it? For the same reason bank robbers don’t obey gun laws. It’s only the “law abiding” that get hit with this crap. Those that don’t give a rip will do what they dang well please irrespective of what the law says.

    But, that’s the ‘Murican way, punish the good for the actions of the bad…especially if you can make a buck simply by greasing the palm of a sleazy politician (or is that redundant?).

    • Hey Mark: I get what you say. The most likely application of uninsured motorist coverage is the hit-and-run. Say, you go out to your car, which had been parked on the street overnight, to find it sideswiped. (Or other parking lot damage) Rather than file a Comprehensive claim. (Or if you don’t have Comprehensive coverage) Then file an Uninsured Motorist claim. There would be no deductible for that vs using the Comprehensive, but you really have to push for it. Maybe a police report would be needed as paperwork on the uninsured motorist claim, vs just your word on a comprehensive claim. YMMV of course

      • Hi Tom,

        The “hit and run” risk is also hugely variable. For me, living in the sticks and rarely parking on the street for any length of time, it is very low and so I am very comfortable not paying for such coverage. Hell, I would be comfortable paying for no coverage. I’ve not suffered a loss (nor incurred one) for the past several decades. I’d much rather have my money instead.

  3. All insurance should voluntary. Anything squeezed out of you regardless of what they call it is extortion.

    Extortion:
    ” Law. the crime of obtaining money or some other thing of value by the abuse of one’s office or authority.”

    IMO, Any legislative bodies which unconstitutionally force someone to buy ANYTHING falls within that definition. Auto insurance and ObamaCare fall into that category.

  4. ” you can skip paying for “comprehensive” coverage, since you’re still free to assume the risk of physical damage to your car.”

    Don’t you mean collision?

    Comprehensive covers theft, vandalism, damage from animals…and is FAR cheaper than collision coverage ($5/month for my vehicles w/ a $100 deductible)…so I keep it on vehicles even if I’ve dropped collision.

    I just used the comprehensive coverage for a $3,000 claim from a deer trying to commit suicide on my nicest vehicle…an old Mercedes sports coupe…$100 out-of-pocket cost to me…no fault is assigned with comprehensive claims, either.

  5. That Bare Minimum liability coverage is a complex issue. Consider how much of your personal wealth may be at risk should you be successfully sued.

    If you’re renting your home, and carry far more in debt than assets, well go for it!

    If you own a $600,000 house free and clear, and have $750,000 in your retirement account, a nice boat that you dock in front of your vacation home in Florida, and a nice “collection” of some valuable items……might be well worth it to pay a higher premium for greater coverage.

    • Hi Mike,

      I think Americans have – in general – become neurasthenic about “risk.” I’m middle-aged; been around awhile. I know a lot of people. I know no one who has been sued into oblivion – or even next week – because he didn’t carry enough liability coverage.

      These things can and sometimes do happen. Of course. But the risk has been wildly exaggerated – in order to get people to pay up.

      • Which is why things such as renter’s insurance (even with a half million liability coverage) are still cheap: good renters rarely cause much damage (when you’re older and haven’t had a history of problems) AND renter’s insurance is not required by law.

    • While I too abhor mandatory insurance, I must say that I do carry more than the bare minimum liability. Once you’re paying for the minimum, adding on quite a bit more (several times the minimum) is really VERY cheap- one of the few good deals to be had in insurance- I’m talking mere tens of dollars…not hundreds- and they just hit you for the upcharge on one vehicle’s premium, if you have several vehicles- so in my case, I can carry THREE times the minimum for about $15 per year per vehicle. It’s too good of a bargain to pass up.

      Not only does carrying more protect my home (Even if your home isn’t worth a lot, who wants to lose it?) but I also like to do so because if the time comes when I ever do slip-up and cause damage, I’d like the other guy to be fairly compensated (And everyone screws up eventually- it’s just a question of when and where…and how much damage you’ll cause).

      Also, with the courts being so crazy, even if you’re not at fault, you may well get sued anyway…and the other guy may even win- especially if there is serious injury (real or otherwise) or death. AND, if you have the bare minimum, and ever get involved in a big case, even if it’s not your fault, if the stakes are high, the insurance co. might just ‘throw in the policy’, figuring it’s cheaper to do that than to fight it, and possibly lose; and when that happens, you also lose your defense, and then have to shell out for an attorney, which will cost many thousands or tens of thousands of dollars.

      With a policy with higher limits, they’re not gonna throw it in.

      When my homeowners comes up for renweal next year, I’ll probably dump it (again)….but I’d keep the vehicle insurance even if it weren’t mandatory; and I’ll definitely keep the bargain higher limits.

      • Hi Nunz!

        I arrived at a kind of critical mass of exhaustion recently. I simply have become tired of all these little bites. The constant pecks at my wallet for things I don’t want and resent being force to buy. It adds up – and it decreases my liberty by (among other things) compelling me to sweat at the grindstone more than I otherwise would need to in order to pay for all of this.

        I just stopped paying the $60 registration fee demanded by the state. It may not seem like a lot of money. It’s a month’s electric bill for me. I’d rather spend the $60 on something I need and use – electricity – than some worthless sticker from the government to put on a truck on which I have already paid taxes and fees equivalent to a fourth or more of its market value.

        I just reduced the “coverage” I am forced to buy (as per the article) which saved me $100 annually. That’s food for a month for me.

        So, these two small items alone amount to a month’s living expenses, just about.

        It adds up.

        Can you imagine how easy and comfortable our lives would be if a third to half our money wasn’t stolen by the government and its lamprey-like parasites?

        • Mornin’ Eric!

          Yes! All that crap certainly does add up- but the even worserer[sic] thing is, even if it were only $5, just the idea that one is being forced to ‘comply’….’just do as we say’….and the fact that it impacts us financially just further enforces how intrusive these laws which criminalize the innocent really are.

          By contrast, if we were free, I would feel good about voluntarily maintaining liability insurance on my vehicles (especially seeing that it would then be cheaper)- but when forced to comply with some law just because ‘they’ have such power over us, makes the same action seem egregious.

          Look how cheap it is to triple our liability limits…just because it is not mandatory to do so! And look how I do it of my own volition because it is a good deal and offers financial protection for myself, as well as being a responsible thing to do- but if it were mandatory to carry those increased limits, the price would no-doubt rise exponentially, and my attitude toward it would change to the point where I would probably stop complying altogether.

          And that is a good illustration of how detrimental a system is when it seeks to control the actions and lives of the innocent who have harmed no one, vs. punishing/holding accountable people for harm they’ve actually caused. Such a system is destructive and detrimental, and leads to more of the very thing which it seeks to prevent, -irresponsibility, and the criminalizing of normal life for non-compliance with some BS law, rather than for any actual crimes.

          A perfect illustration of what Ayn Rand said:

          ““There’s no way to rule innocent men. The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.””

        • PS.

          As a perfect example of the detriment to society that laws like mandatory insurance create,: I have encountered numerous young’uns over the years, who have actually uttered the phrase: “I don’t need to be careful; I’m licensed and insured!”.

    • That’s where an UMBRELLA policy comes into play, which is usually cheaper to protect your assets against opportunists whom magically “slip” on your driveway on a summer day, 80° F, dry.

      • Hi Doug,

        I love being out in The Woods. My driveway is gravel – and no one comes up it unless they are simpatico people. The rest know better!

        • Amen to that, Eric!

          Plus, not everywhere is like CA. or NY. Here in KY. people getting a payday for tripping over their own two feet doesn’t fly. My idiot sister who has a history of suing for such things [At least when she lived in NY and FL) conveniently fell in the parking lot of the apartment complex where she lives, resulting in an injury to her ankle. She went to a local lawyer…he told her to get lost! 🙂

          “But…but…there was a [tiny little] defect in the pavement”
          Lawyer: “Then why did you walk on it?”

          Similar scenario in FL netted her $60K (“My back! My back!”)- Which she promptly squandered and has nothing to show for it.

          Thank goodness there’s still some sanity in a few a these places!

  6. Here in Texas, many insurance companies tack on a $5k or so “medical coverage” item, on top of medical insurance you’re penalized if you don’t buy. This can be removed, although you may have to put it in writing that you don’t want it.

    With an 18 year old learning to drive (manual, in my old Land Rover – this could be a whole ‘nother topic) and me footing the insurance bill until after college, I’m putting the ’03 VW Tdi in his name and buying him his own minimum coverage policy in his name rather than upping the limits on mine. Worst case they sue and get what’s left of the VW and his Xbox.

    If you do buy comprehensive/collision coverage, crank the deductibles as high as you can: jumping from $500 to $1000 will save you quite a bit.

  7. Fighting my homeowners insurance right now, if I had the 10 years of premiums I’ve paid into the system in my bank account I’d have already fixed it myself. But nope, the majority of the population is dumber than mud; therefore the bank has to make the rest of us foot the bill for their financial ignorance. 5 years or less from being debt free (1 auto loan and 2 mortgages), then I can tell the bloodsuckers to go get bent. Hell I might even quit my day job and work for cash at that point. Screw them all.

    • Amen, Hoosier!

      One of the happiest days of my life was the day I called my homeowner’s insurance company and told them I would not accept the arbitrary premium increase I just got from them. Never filed a claim; no legitimate reason for it. They said no.

      And so I said no.

      Cancelled the policy – and since that day have saved almost $15,000 (so far)!

    • After owning my first home for 3 years, hurricane Katrina struck. I watched in awe as my co worker who owned a mobile home in a trailer park and had no insurance got a $20,000 check from FEMA.

      Thought I was set since I was insured. Got a letter from the insurance company thought I was getting a check and could start repairs – all I had was a document totaling my damages at $10,000 listed below that was deductible listed at $10,005. I had to pay for all repairs out of pocket. Me doing all the work. I spent around $3000 and a lot of time roofing, fencing, and cutting up trees.

      Lesson learned.

      • H Bin,

        Amen. Channeling Judge Valkenheiser from Nothing But Trouble (a great movie): Insurance people need a ride through Mister Bone Stripper!

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