I recently had to use an insurance plan, and was reminded of my dad’s description of insurance as “the bet you want to lose.” Growing up, I found this a very helpful way of looking at insurance.
Of course, no one wants to die, or have their house burn down, or get involved in a terrible car accident. However, if any of those things happen, you probably would like some financial backing to take care of business.
This is why I cringe when I hear people talking about how (all) insurance is a waste of money.
For sure, I am not paying for an insurance policy that will replace a $120 kitchen appliance or a $500 television. Given my current financial situation, I can handle replacement costs for these things, if needed. There is no need to pay insurance to cover losses you can afford to take care of by yourself.
On the other hand, I would find it very uncomfortable if I had to pay cash out of my pocket to rebuild my house and replace everything in it, should it be destroyed.
Sometimes, you have “inside information” on the odds that you will need insurance.
For instance, I live in a 94 year old house. At least three times since 1995, the water line has had to be dug up for repair or replacement, leading me to believe that water line insurance (sold by various utilities in the area) is probably a good idea. $5.95 a month vs $3000 to $7000 an incident seems like a good bet. Even better, the insurance company has a contract with companies who do this, so you don’t have to call around, begging for someone to come fix your place, all the while wondering how huge the bill will be.
Not only do we have insurance (or maybe it should really be called a maintenance plan) on the water line, we also pay for a plan which covers the nearby gas line. Which turned out to be a good thing when the gas company finally came by to check on the “minor leak” we had noticed earlier this Spring.
Our front yard has been dug up, our gas was cut off for several days–leaving us without heat, hot water, or a working stove during the last cold snap of the season–but at least we aren’t looking at a 4-figure bill for the repairs.
I was very happy to have that insurance plan even though it was truly a bet I did not want to win.
What do you think about those utility line insurance plans? Are they available in your area?