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Insurance: A Tax on People who are Bad at Math?
As Shirley and Heather drives away to Brighton, Pat comes out from the service station and calls out that it is her car, but she slips and breaks her shoe. Any advice on if I should open up a Roth for me and her, one Roth and one taxable account, or just taxable accounts? Blue Cross Blue Shield of Delaware: Social Security is insurance as well. He breaks up a fight and is almost hit by Shirley, however, he ends up staying the night and having sex with her. Make an appointment today and experience the Floss difference! It is relatively cheap since I bought it so young.

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Price is high, but it stays fairly constant even as the level of care need increases. If your parents have a spacious house, another option will be to hire live-in care which includes housing for the caregivers. My mother was paying late fees on bills and making other financial mistakes she had never made before for quite some time before I became aware of it. Also get them to consult with an attorney and choose someone to give power of attorney for financial and health care now—if you wait till you need it, its too late.

This goes for everyone, young and old—do it now! You can broach the subject by telling them that you are doing it too. Tammy June 2, , 9: While I agree with the basics of this idea — not throwing money away on insurance for contingencies that we can cover ourselves — I do think we need to think carefully about just what we can cover ourselves.

For me and my husband, we would both be devastated if the other died, having been together longer than we were single. Even though we could survive, it would be so much easier if we each had the option to not have to work in order to survive, for several months after being widowed. We carry a small amount of life insurance on each other, so we can have time to grieve without worries of paying the bills, and time to make some decisions about what may need to change in our life.

My thoughts on this are probably influenced by my career in mental healthcare, as I care for people everyday whose lives are devastated by something, often outside of their control, and the last thing they need is the additional worry of having to return to work within a few weeks in order to pay the bills. It is built on the premise that the more people are in control of, and responsible for, their healthcare spending, the more they will make good decisions.

All prevention services are fully covered. I do not agree to your view. First of all, I am not an advocate or affiliate of any insurance business, and do not have any biases. Having said that, my view is Insurance is a Risk policy , rather than anything else. What is covered under the risk is completely up to a person and what he values most in his life.

So if a person wants to buy a Rolex, and can afford to loose the Rolex without much discomfort,he does not need the insurance. However, a young family should have adequate insurance in case the wage earner s gets disabled or is unable to work. This becomes a question of risk mitigation, rather than payment. IF you have built enough wealth that you can forgo the rest of your life without earning anything, by all means, laugh me out of town.

But just in case you have not, what is your plan B? Actually it sounds like we DO agree. I said you can skip buying insurance once you can afford the consequences of any loss. And even better than buying insurance for losses, is becoming financially prepared for a loss BEFORE buying something. For example, save enough to easily replace your car before you even buy it. Alex in Virginia February 20, , 5: You have an incredibly clear and different way of looking at things! GL June 3, , 3: Well, that, and the damned mandatory car insurance.

Garrett June 30, , May the variance be ever in your favor, GL! DDD June 4, , Quick question — you mentioned that both you and your wife are from Canada. MMM June 5, , 3: The families back in Canada sometimes ask the same thing. The only real reason is that it is way, way, way, way, nicer to live here in Colorado than it is in the Great Lakes region where we grew up. And on balance, it is still much less expensive to live in the Western US than in most Canadian cities, because things like housing, food, any sort of manufactured goods, and property taxes are so much lower here.

Jon June 6, , 4: I was curious what you think about Umbrella insurance? It seems like it might not be a bad idea once you have significant assets — it is relatively inexpensive. A lawsuit could really put a damper on the most carefully laid early retirement plans. It also seems like it might be a good idea to establish a LLC for each rental property you own.

It actually paid for itself in my case because I got a discount on other policies. MMM June 16, , This umbrella policy idea is new to me, so thanks for sharing.

It seems the wealthier and more involved you are with multiple tentacles in your local business community, the wiser such an idea would become. Thanks again for the ideas! David Herr August 30, , 6: An Umbrella policy that protects your savings is critical — the liability limits for the typical auto policy do not come close to the amount you would be sued for in a major car accident. Term life insurance is a necessity if you may have a taxable estate, and its cheaper to get when younger.

If you get a serious illness and the treatment you want is not covered by medical insurance a situation which I believe is going to become more common , you can sell the policy for a discount to its face value, and depending on how serious the situation is, the discount might not be that much. Term life insurance is also relatively cheap, with most of the price being dictated by actuarial considerations, and very modest profits.

Whole life policies are much more expensive, and not worth it. Build savings on your own, not through an insurance policy. Insurance policies are to cover risks, and should be structured to be as simple as possible — the risk becomes reality, the insurer sends you a check. Seth January 20, , Did you ever make a decision on an umbrella policy? People carry little liability insurance auto, home, or business and end up liquidating significant personal assets because of lawsuits.

You should check and see what assets you own would be exempt in your state, but usually savings accounts, investment accounts non-IRA or K , and property other than personal residents could all be up for grabs. As jDeppen pointed out the cost is minimal compared to what is protected: Bill June 8, , This is unfortunate because conceptually you are right, an insurance company will charge a premium to the insurance buyer, above the expected loss on the policy.

They are simply exchanging a known expense larger than their expectation value for lower volatility. Painting with a broad brush bonds generally have a lower rate of return than stocks but in exchange have lower volatility.

Depending on your risk tolerance it may even be a more optimal one. Economically you will, on average, come out far ahead by investing that money in equities instead. By prepaying your mortgage you are taken a lesser known return in exchange for a greater average more volatile return. The concept is completely analogous although you come down on the opposite side of the debate in that arena.

It is important for people to think about insurance in terms of expectation value. You are absolutely right that some insurance can be priced so highly compared to expectation value that it never makes sense for anyone to buy it. Another good example is insurance on consumer products. My wife just bought an Iphone and they offered her a two year insurance plan. So in theory I agree with your sentiment that insurance costs more than on average than bearing the risk yourself.

I usually opt for high deductible plans for myself, I despise the fact that my medical insurance covers too many everyday expenses, and I turn down every policy that I get offered when purchasing a consumer good. If you are completely informed about the cost of your decisions and still want a no deductible gold plated medical plan more power to you.

I think that one major reason for this is that the most costly insurance policies people are involved with are for medical coverage. Pricing in the health care market is completely opaque, there is no way to know what treatment costs so it cannot be compared to the cost of insurance. MMM June 8, , Fussy, I added a question mark to the headline just for you, to tame the hyperbole a bit. TNT December 18, , 2: I think you are way too lenient on that reply.

Insurance absolutely IS about combining risks and thus flattening out the payment curve for anyone needing to claim, but anything short of a long term recurring liability like an illness at least for you guys in the US of A, unlike us in the UK, who pay for our chronic healthcare out of taxes, but seem to pay less than you guys in the round will almost certainly never cost in.

And they really do rely on fear factor and people not understanding the math. Ever see a TV ad for an insurance company explaining the statistical likelihood of your claims outweighing your premiums over your lifetime, or even a 10 year period? We self insure on most things these days, and have never ever taken out insurance on individual household items, and in the main would never have had to claim if we did, thus saving several thousand pounds, which by now would pay for any appliance or TV that now failed, several times over.

This insurance in particular is all about the maths. Spork October 13, , I have long had this very same discussion with folks… and find it almost impossible to convince them. By retired, I mean I decided on my own to quit my job, move somewhere and set up shop, then sort of just waited for another job to come along.

I found that the difference in premiums on high deductible and low deductible insurance was such that in one year you saved enough to cover the deductible.

Tom October 18, , 8: Kira July 4, , Alan Jackson February 1, , 3: It is one of the big problems I have with the US healthcare system. In a way, I consider a high deductible insurance plan a form of membership where you get the same rates that everyone else does. MMM February 1, , 5: Actually, you can get the same deals that the insurance companies get — I read an article about this once and there are in fact entire books on the subject.

The basic idea is, you get in touch with your preferred hospital in advance and set up an account with them with the pre-agreed discount. They are happy to do this, since an individual with good credit is much easier to get money from than an insurance company, which makes a point of being annoying about every single claim.

Richie Poor June 20, , Getting cash discounts has worked well in many cases for me. Also check into medical tourism. Go ahead and get that root canal the day before you leave Costa Rica. Your wallet will thank you. JaneMD February 7, , 9: I have to disagree with that MMM on setting up the healthcare deal with a hospital. Of note, you should never let your health insurance lapse if possible.

I got a new job and we decided not to cover my spouse since his job in a few months would be providing health insurance for much lower premiums. 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. He got his start in dentistry by obtaining his dental hygiene degree in at Central Community College in Hastings, NE.

McConnell enjoys all aspects of dentistry and likes the benefit of putting patients at ease through IV sedation.

In his free time, Dr. McConnell enjoys travelling, fine dining and spending time with his dog Stella. Villafane strives to provide the best patient care possible, while offering a comfortable environment for his patients. He realizes that not everyone loves going to the dentist, but he works every day to make Floss a welcoming experience for his patients.

Justin Villafane was born and raised in Beatrice, Nebraska. Justin attended the University of Nebraska Medical Center College of Dentistry, where he became interested in oral surgery and general dentistry.

Since his graduation in the spring of , he has been practicing as a general dentist at the Lancaster County Health Department and as an associate at Woodward and Villafane Dental, a family-owned business, in Cortland, Nebraska.

Villafane loves spending time with his wife and his family, playing sports, hunting with his father, and following Nebraska Husker Athletics.

Kim has been in the dental field since She began her career as a Dental Assistant working for an Oral Surgeon, but found her true passion was working in general dentistry and office management. She has been with Floss Family Dental since opening day, April 18, She enjoys running, biking, and spending time with her husband and dogs. Raised in small town Hickman, NE, she moved to Lincoln to attend college, having always wanted to work in the dental field.

The facilities are excellent, with timely and friendly service and a great staff. Floss is perfect for all my dental needs. You are not just a number, they are quick, respectful and great at what they do! Villafane and staff are simply the best! I know I am receiving the best care when I come in for regular check-ups.

My favorite aspect of Floss Family Dental is the flexibility in scheduling visits after work. This alone would make me choose them over any other dental office. Everyone who works here is very friendly and they give us the best dental care!

Villafane and staff are wonderful. They are very gentle, and I'm very happy with the work they've done. Everyone is so friendly, Kim is also very helpful. The staff is always friendly and professional. It is a welcoming environment from the time you enter the office. We offer a wide range of dental restorations, including implants, tooth-colored fillings, crowns and bridges, veneers and root canals.

Customizable over a broad range of procedures, patients choose IV Sedation for the ultimate in ease and comfort. We strive to put patients at ease and provide a relaxing and comfortable environment for maintaining those pearly-whites. Do you have sleep apnea or a CPAP machine you can't comfortably wear? Ask us about our new and exciting oral appliance therapy for sleep apnea. Do you have chronic head, face or neck pain not related to a serious injury?

Your employer dictates the coverage in your policy. These are actual Policy Bulletins from many of the major insurance carriers. Your policy may vary so allow us to check your benefits for you! These are basic guidelines but your policy may be different, so allow us to check for you! Per Clinical Policy Bulletin , all patients require 2 years documented medical history of morbid obesity, 3 months physician supervised non-surgical diet, exercise and behavior modification treatment and a psych evaluation if medically indicated.

StomaphyX is experimental and not covered. Sleeve and StomaphyX are investigational and not covered. Blue Cross National CareFirst: Per Policy Bulletin 7.

Gastric Sleeve is covered. Blue Cross of Alabama: Blue Cross of Arkansas: Per Policy Bulletin insurance requires BMI over 36 and failed structured weight loss program. Blue Cross of California: Gastric Sleeve and StomaphyX are investigational and not covered.

Blue Cross Blue Shield of Delaware: Insurance requires LOMN, cardiac, pulmonary and psych clearance and sleep apnea work-up. Blue Cross Blue Shield of Florida: Per Policy Bulletin insurance requires five-year history, 6 month diet, psych evaluation, and TSH showing no endocrine disorders. Blue Cross Blue Shield of Georgia: Blue Cross Blue Shield of Illinois: Blue Cross of Blue Shield Massachusetts: Blue Cross Blue Shield of Michigan: Blue Cross Blue Shield of Minnesota: Blue Cross Blue Shield of Mississippi: Per Employee Access Policy Bulletin insurance requires five-year history of morbid obesity, documentation of failed diet attempts and TSH.

Blue Cross Blue Shield of Nebraska:

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