I see more and more people referencing self insurance as their goal. What does that mean? I mean maybe I’m slow or I’m missing something. So from what I hear, the goal is to grow your wealth (savings, investments) to a big enough amount while also paying off all your debts. Once your debts are paid off there is no reason to have life insurance. Is that what you read too?
I was reading Life Insurance Basics: Part One on Personal Financial By The Book the other day. Listed under the heading “Does everyone need life insurance?” was the following paragraph:
Anyone who is self insured. What do I mean by self-insured? Those who have done so well managing their finances that their survivors will do fine without needing a life insurance payout. These people would have paid for houses, no debt and a healthy retirement and investment portfolio. This, by the way, should be everyone’s goal.
This really got me thinking. I’m not saying Joe is wrong. I mean he is a Dave Ramsey certified financial coach. So he is out helping people and I think that is great. People need help. Now as for Dave, there are parts that I think are great and parts I definitely don’t agree with but I’ll let you make up your own minds. I think he’s great for the right person.
First, I never want to have no debt and I never want to pay off my house but that’s just me and that’s not what this post is about. I do want to be debt-free. Read Debt-free to me to learn my views on being debt-free.
So now let’s say I’m debt-free or maybe I reach Joe’s goal above. Now I should let my life insurance go? If that’s the case then why stop there? Should I drop the limits on my car insurance to the minimums? Raise deductibles to the max? Drop my disability and liability insurance. Mortgage is paid off I could just drop homeowners coverage right? I mean I have no debt and a ‘healthy’ portfolio. I didn’t even mention health insurance I could probably self insure there as well.
Wait why do we call it self-insured? Shouldn’t I just say no insurance? Isn’t that the same? Why is it that I only hear about self insurance with life insurance? Shouldn’t it apply to all insurance? Or is there a pecking order I don’t know about?
Have you read the definition of self insurance on wikipedia? I don’t think that applies to 99% of the population. I hope I’m wrong with how much I see it as a goal. The funniest thing might be that self insurance is mostly mentioned in terms of life insurance. When I look around insurance that’s the only one that’s certain; death and taxes. I wish I could get tax insurance.
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Thanks for reading and commenting on my post. I appreciate your thoughts on being self insured, and you rightly pointed out my error, in a very civil way, of stating that this should be everyone’s goal. Clearly it isn’t.
And if I every figure out how to get tax insurance, I will let you know.
Joe:
Thank you for reading. The point of my post is not to say that you are right or wrong. It is to simplying get people thinking about something that I hear all the time and you just happened to say it most recently. You have a great blog and people should check it out. http://personalfinancebythebook.com/
EofW
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