Can somebody convince my stupid ass that insurance ins't a scam?

>you could make a cost benefit analysis
first it requires accurate assesment of the risks involved.
second if you do you will be horrified because and this is important your risks are not the same as the insurance companies risks because of fraud.

because most people cannot dish out thousands in case something happens to them, so they "prepay" in advance

you type like ur trying 2 pretend ur not a middle aged woman who clumsily browses Veeky Forums.

Insuring an actual risk isn't a scam. It's a type of gambling, sure, but not a scam.
Using life insurance as a means to achieve capital gains and increase your savings is definitely a scam though. After accounting for overhead costs and insurance tax there is no benefit left you wouldn't get by directly investing into the financial markets, so it's essentially throwing away money.

Insurance has its time and place. I'd say medical, car or life insurance are harder to grasp and evaluate. But with fire insurance it's usually pretty obvious to people. Most people who own real estate have exactly 1 property: Their house. It often accounts for way more than half their net worth. The risk of some accidental fire (who knows, maybe an electrical defect without anyone being at fault) wiping out 70% of your net worth and making you homeless is maybe small, but catastrohpic. People would rather pay a few bucks every month to eliminate that risk. It's a perfectly rational decision.

Unless the fire actually happens to you, it's not optimal to pay insurance. But the point is, you don't know the future. Btw, this is not something unique to insurances - people, especially institutional and experienced investors, do it on the financial markets all the time: They hedge. Insurance is real life hedging.

This. What other posters are saying about insurance overcharging them, or refusing to pay, overcalculating their risk, etc. Has little to do with the concept of insurance itself.

It's worth keeping in mind that predatory insurance is really an American problem. Burgers usually cannot fathom that all the absolutely fucked up things in their country could also be done right with government oversight. Muh gommunism, bree marged, obbression, durgurguhr, etc. So they argue that we should just do without them entirely.

think about this
u save money for yourself 1m dollars incase something happens 2 ur house
. nothing happens....
u still have 1m.
something happens , u pay out however much u need from your reserve.
perhaps u can even open ur own insurance business...

else.

you pay out 1.5k each month 2 insurance company

20 years later
you have payed out 2.5 mill or something
nothing happens 2 ur house ur out of the money
something happens
u haggle and beg the insurance companies
to up hold there end of the deal and if they dont
u dont even have money saved for litigation,
as if u could possibly contend with their money pool in a financial court battle.

What if something happens to your house while you're saving up this 1m?

What about life insurance trusts?

Good way to avoid inheritance tax if you need to.

Your example is so bad you must be underage b&

Point has been made. Stop arguing.

Makes sense because the law also requires doctors to give you emergency care if you're about to die.

As others have already said it's about risk. Saving up money to rebuild your house after a fire takes a long time not to mention you would lose a lot of your net worth in that one fire. If you are insured you could start rebuilding or buying a new home soon after.

Also you're forgetting that insurance companies don't take more money than they pay out. Pic related, it's the income statement of the dutch insurer ASR Nederland. On the top you can see income from insurance premiums. Below that there is income from investments. After that comes the money payed out in claims. And finally there is business expenses and profit.

As you can see there's a total income from premiums of 3765 million euro, while 5250 million euro is payed out. The profit is being made by investing the premiums before it needs to be payed out.

I'm not really good at explaining stuff, so i hope this was somewhat helpfull.

What this guy said.

You can choose to self-insure and take on the risk of loss yourself. But this usually requires savings, not having dependents and being able to live without worrying about "what ifs".

Most people pay to protect themselves, their family and their assets against loss because a relatively small insurance premium can avoid serious financial problems later on in life.

Insurance seems like a waste of money until you need it, then it pays for itself many times over.

I'm an insurance professional AMA.

In certain situations there can be tax advantages for holding investments in a life insurance wrapper.

Plus if you have the peace of mind that if you die early you won't be condemning your loved ones to a life of poverty.

But I agree, no honest financial advisor would recommend life insurance to an average joe looking to save or invest.

Also depending on the country its illegal to not have insurance for certain things like your car.

Because you don't have the several million it takes to insure your health. If you did, you could just save your money and put it in stocks, and it would work out better for you, but do you have sufficient capital?

You raise a valid point - "adverse selection" is where people who are more likely to make a claim take out insurance which ends up costing the less accident-prone people.

It's up to the insurance company to prevent this by setting the insurance premiums accurately - e.g. someone with a bad claims history should pay a much higher premium.

If you are low risk, e.g. you live in a crime free area, are careful, are fit and healthy etc. then it may make sense to self-insure. Large companies sometimes do this with in-house "captive" insurance companies.

That way you aren't paying for the insurance companies fixed costs or paying for the claims of reckless people.

It all depends on the circumstances - usually financial reserves and risk tolerance.

you dont buy a house if u dont have back up money. u live in apt or with ur mom.

ur so silly to buy anything on credit/margin/mortgage. if u think thats wise i have nothing to say to you.

lol, ur a fuckin moron. its simple math, ur trying to overcomplicate it .
AND u fail at biz

OK...

You mention 'saving 1M' to be self-insured...

Yet you compare it to an insurance plan that costs $1500pm which would insure a home to the value of about 10M - $1500 will insure a house for a year you fucking child.

Your scenario also runs the assumption that nothing happens. Here's what you're missing.

Month 1 - "Would you like to pay $130 to insure your home against any/all damage, or do you have $1M liquidity to use in the event of disaster?"

Month 2 - same question

...

Month 100000 - Same question

shut ur fuckin mouth clown.

stop being autistic and use ur fuckin commons sense .

u can save ur money wisely incase of disaster.

or u can pay into a lottery.

I do use common sense. That's why I see value in paying $130pm instead of paying nothing and having nothing to fall on in the even of a disaster.

u pay it to yourself in an emergency fund and fall back on the money u saved ur self if something happens.

insted of paying insurance premiums and if nothing happens u dont get the money back

its such simple math
just shut ur mouth u incompetent fool.

what if something happns before the emergency fund is full

Yeah he's not really worth the discussion. His stupidity triggered me and his naivety kept it burning for a few replies until I realised the jokes on me.

like i said. dont buy the house before u fill ur emergency fund.

same goes for anything else.

otherwise, if its ur health.
ur parents should have an emergency fund for you.
make them pay.

u wouldn't have a kid without an emergency fund for them if u were wise.

u see where im going with this?

u can either live like a nigger, and pay out

or live like a boss and get money.

the choice is ultimately yours.

so your answer is make your parents pay for your medical bills because you were too stupid to buy insurance. sound financial advice man thanks for making Veeky Forums a better place

Insurance is NOT supposed to be an investment, it's a tool for reducing catastrophic risks, that's why it only makes sense to get insurance on things that are a big part of your net worth (like a house) but not on relatively cheap non-essential things (like a TV).

lol.
ur so mad right now , why cuz ur parents are niggers who are shit with money and dont care about ur health!!!?!?

LMFAO

cope harder.

>cope
This is the worst meme to ever come out of Veeky Forums.

is that what you tell yourself to cope?

Its not really a meme. Its like 1 NEET trying to force it. Nobody else here uses it.

>ur so silly to buy anything on credit/margin/mortgage. if u think thats wise i have nothing to say to you.
If you buy with a mortgage you can invest the cash and use the interest to make payments.

There's the possibility that your shit might get fucked and you won't have the money to unfuck it, the premium on insurance is the cost for ensuring a payout of "unfuck my shit" money if shit gets fucked.

what?

if u buy a house in CASH.

then its paid .

u pay interest on a mortgage .
the bank doesn't pay you.

what kinda math world are you living in?

Is this how you cope bitcuck?

im invested in bluechip tech and internet stocks , birdbrain.

>cope

indeed

cope1
kōp/Submit
verb
verb: cope; 3rd person present: copes; past tense: coped; past participle: coped; gerund or present participle: coping
(of a person) deal effectively with something difficult.
"his ability to cope with stress"
synonyms: manage, survive, subsist, look after oneself, fend for oneself, carry on, get by/through, bear up, hold one's own, keep one's end up, keep one's head above water; More
(of a machine or system) have the capacity to deal successfully with.
"the roads are barely adequate to cope with the present traffic"
Origin

Middle English (in the sense ‘meet in battle, come to blows’): from Old French coper, colper, from cop, colp ‘a blow,’ via Latin from Greek kolaphos ‘blow with the fist.’

well it could work actually if you get more interest on your investment than the interest on the loan.

not bloody likely tho.

Is this how you cope?

...

C

A typical mortgage is, what, 5%?
And a typical index fund returns about 7%, right?
So at minimum you can cover the interest on the mortgage with the interest on your investment, and still have money left over to either put towards the monthly payments or reinvest.

what if the housing market collapses?

WHAT IF THE STOCK MARKET DOESN"T RETURN 7%??????/

what about paying your insurance?????

what ABOUT CLOSING COSTS!??!

do u know anything about housing or banking?

cuz ur sure know alot about gambling away money like a degerate.

ope.

this is why i decided to be celibate
the day we all stop putting the pussy on the pedestal is the day women go back to not being absolute pieces of shit

No you can't actually, because you have to pay tax on that 7%... so you're putting a large sum of money at risk on the share market for absolutely no reason

...

>gambling away money

What the fuck did you think investing was?

investing != speculation

pic

forbes.com/sites/lawrencelight/2015/11/14/whats-the-smartest-move-pay-off-mortgage-or-invest-the-money/#cda48977c47e

What Ops really asking, "Is it morally ok to burn down buildings for insurance scams?"

Clearly yes. You're welcome

>which is why he write for forbes, stead of being of forbes list.

This.

Insurance companies are greedy though.

Their ratio is usually 2 to 1 I think. Meaning that after all expenses have been paid, and claims have been paid, They are still left with 50% of what they took in for the year in Net income.

Not even close to 50% m8.

Most insurance companies combined ratio between 95% and 105% i.e.

The degree to which it can be considered a scam is dependent on how good you are at keeping yourself healthy or maintaining and protecting your stuff. It is absolutely not a scam for someone with a poor immune system or low muscle mass, or for someone who lives in an area where they can get robbed, or maybe there can be wildfires or hurricane damages.

For anyone that lives in a reasonable area and maintains good health, it can seem like a scam, but then again cancer could strike your ass at any time. And it really is fucked up to expect doctors to give you treatment if you aren't going to be able to cover it either yourself or through insurance.

Just opt out, and save up in case you need to get treatment in Mexico I guess.

Is this how you cope?

The solution is to buy risk insurance. Insurance for the event that you dont have to use your insurance. Like if your house doesnt set on fire within 20 years, you get a huge payout. If this doesnt already exist, someone should make it. Its a huge market waiting to be exploited and it helps the people.

I know people that work for insurance companies and I find this very very hard to believe.

Citation needed.

Because you couldn't possibly pay an 800,000 pre insurance medical bill or pay to have your house rebuilt after a flood disaster you fucking chump.

You paying your premiums with thousands of other people allows you to have large payouts exactly because they take in more money from policies than they pay out in insurance payments.

verisk.com/visualize/visualize-q1-2015/combined-ratio-and-other-trends.html

So heres a good question then.
Instead of insurance through companies, why dont people band together with citizens from different areas of the country (like lets say a neighborhood from Texas, Maryland, and North Dakota each), and make an agreement to pay casually into a relief fund? That way they arent getting jewed as hard by companies, but the same end effect is accomplished since a disaster in Texas probably wouldn't effect Maryland or North Dakota and vice versa? The money is there to cover everyone, its non-profit, and Texas can make it up by ponying in a little more when they get their shit together?

Most people can afford to pay $100 a month, most people can't pay a 1 time $600,000 surgery

the point is the mortgage you pay (and 6% more likely than 5% which will go up with inflation any day) is fix while investments can return shit year after year. so usually not a solid idea to invest mortgage funds. your profit is marginal your risk is significant.

>72 posts
>cntl-f "deductible"
>0 results
Jesus people.

The best way to deploy insurance is on high value items and with large deductible. You're self-insured for small losses, but have protection for large losses. Plus, the large deductible keeps your expenses low.

Idiots always choose low deductibles and then wonder why their insurance costs so much.

that's because they pay many $100 per month on insurance and silly shit like that tho.

i'm a poorfag in a poorfag country a series of surgeries would set me back around a $1000 i could put it on the table any day tho. not sure why surgeries so expensive in the usa but i doubt the doctors are a thousand times better than here.

Omg a concept that strikes fear into every American... Healthcare for all

>Over the course of 42 years, the family that borrows sees a positive outcome in 97% of the time, which is important for major matters like your retirement. The only period when paying cash would be better was between May and December 1981, when the mortgage rates ranged between 16.4% and 18.5%. If we allowed for refinancing, the mortgage-and-invest approach would be favorable at all time.

Not enough details given in that article to let me rip it to shreds. Feels irritating

it really depends on the tax regulations i guess it's not unimaginable that the system is hacked this way, for me here in this reality i live in it would be an insane gamble to invest mortgage funds and most likely a zero sum game.

That's kind of how the insurance industry was born - people from the same religion, trade associations or area, pooling funds together to insure against accidents at work and provide pensions for widows.

The issue non-profit "mutual" funds had was raising enough money for expansion. Profit making businesses could borrow money easily to grow bigger and become more competitive. Economies of scale meant lower premiums for everyone so that's where the industry developed.

Marine insurance still uses the non-profit business model as "P&I clubs" for boat owners.

But usually in insurance, bigger is better. A huge fund is safer and more predictable. The law of large numbers means you can predict claims better and price premiums more accurately with more data.

Also insurance companies basically "sell" policies to each other so they don't get concentrated in any single location. This smoothes out their results and protects against natural disasters.