Tuesday, November 23, 2010

Insurance problems

I've some friends of mine that moved into their house before it was completely finished. It's a bit of a pain, but they are saving a bundle on rent. There is no siding on the house. It's covered in housewrap and will be fine until spring, when they'll be in a position to afford siding. Problem is their insurance policy will be canceled in December because they don't have siding.

Now for anyone with a mortgage, this would be a crisis. Without house insurance, the bank will call your loan. It's a condition of having a mortgage. My friends didn't get a mortgage. They've been working on the house as the funds come in. Which is why the siding isn't done yet. Since they don't actually need insurance to keep their house, this problem is downgraded from a crisis to a concern.

They have a fire extinguisher, smoke detectors, and the place has all new wiring. Fortunately, they don't smoke. Smoking is a major cause of house fires. Snow's on the ground around their place, so they don't have to worry about fire spreading from a neighbor's land. They've taken precautions. Come spring, they'll be in a position to finish up the house enough to meet insurance requirements.

My dad doesn't have any insurance on his place in Florida. After the 2005 hurricanes, insurance rates went way up. My dad said the heck with it, he wasn't going to pay that kind of money. If the house blows away, it blows away. He'd just look for an apartment. (or move in with me, which is fine too.) In the five years he hasn't paid insurance, he's saved more money than the purchase price of his place.

My truck insurance is due on the 28th of this month. I won't have the money to pay it until the 30th. No problem, I'll send out a check then. There's a ten day grace period before the insurance is cut off. Of course, if I had a car loan, the bank would be notified on the 29th that my insurance wasn't paid. Since I own the truck, there's nothing they can do about it. New Hampshire doesn't even require vehicle insurance, so they can't get me that way either.

I don't have a problem with the idea of insurance. It makes sense to be able to spread the risk around. Mandatory insurance bothers me. People should be able to opt out of any sort of insurance: house, vehicle, or health. When it's required, the insurance companies know they have you. In America, we used to have the freedom to take chances.



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  2. I have to disagree with you on no mandatory insurance because you are only considering the effect on the insured.
    Driving affects other people. Who do you think will pay the medical bills after an auto accident if there is no insurance? Do you think it should be the victim? Remember, there is no guarantee that the person at fault will have any money.
    If banks did not require insurance on houses that they hold mortgages on, they would simply buy insurance to protect themselves from loss and add the cost to the interest rate. And guess what, they won't price shop so the debtor gets little benefit while getting screwed on the price.

  3. If you own your own home, I agree. As far as auto insurance, you need to have sufficient means to cover the other guys damages and medical bills if the accident was your fault. But, there is other ways of doing it. Back in 1980 when I moved to Texas, I had the option of car insurance or a bond. If you had the money, you could post a bond.

  4. Insurance is one of those things that make for some interesting discussions! No matter what you think, there is always someone with another opinion!

    Way too much of the insurance today is just a rip off, but then it has always been that way, it seems!