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An Alternative to Homeowners Insurance for Those of Us Wanting to Live Simply

Updated on June 12, 2015
Larry Rankin profile image

Larry Rankin attempts to discern the logic, or lack thereof, in various, topical social issues.

The concept of how insurance is to serve humankind goes as follows:

Tragedy is rare, so if the masses pay a few dollars each month for peace of mind, they will be protected on the off chance that things go wrong. Everyone wins.

________________________________________

It is a concept that is good and pure at its core. It is a concept that should work. But instead of serving its purpose, it has become a perverted thing predominantly serving impotent greed.

From time to time I have an idea. Like all ideas, it may be good, it may be a bad, or it may simply need revision. Only time will tell. To expedite the process, as I so often do, I’ve decided to enlist the help of my friends. You folks can tell me whether or not you think I’m on to something.

Money! Whether you're trying to live simply and just have enough or you're a corporate pig trying to steal every hard working souls' last penny, we all rely on it.
Money! Whether you're trying to live simply and just have enough or you're a corporate pig trying to steal every hard working souls' last penny, we all rely on it. | Source

Why We Have our Crappy Homeowners Insurance

My idea begins humbly as follows. The other day my wife and I received our yearly home insurance bill. It came to around $1,500. We live on a nice little plot in the country. The house is a small one that began life in the early 1950s. Over time this and that has been added on to it, and as things are, it is right around 1,000 square feet in size. Just enough space for my wife and I, our daughter, and God willing, one more child in the future to live in relative comfort.

The insurance we have wouldn’t cover anything if something went wrong: a tornado, as is so common in Oklahoma, or a flood, which has been the favor of God’s wrath in recent months. Our insurance company would find some way not to cover it, and even if something went wrong and we were to somehow beat our insurance provider in court after years of litigation, and they actually were found accountable for their responsibilities (Imagine that!), we would be so put out by that point that any perceived benefit would only go to our lawyers.

We know this, as much as we know there are some insurances that actually work, but we chose this insurance for the same reason most people choose their insurance: because it is relatively cheap in comparison to insurance that works, and we know with a little luck we will never have to use it.

By now you may be asking yourself, But why have insurance at all if you know it won’t work? The simple answer to this query is that we have to. We couldn’t buy our house outright because we didn’t have enough money. We couldn’t put as much money into the purchase of our home as we wanted, because you can’t get good interest rates unless you borrow “X” amount of dollars or more. And you can’t by a home by paying out a mortgage unless you have home insurance.

Does spending $1,000s on insurance make sense for a home like this?
Does spending $1,000s on insurance make sense for a home like this? | Source

Opinion

Do you believe lenders should be able to force homeowners with a mortgage to purchase homeowners insurance?

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If You Have to Get Insurance, Why not Get Good Insurance?

So if you have to get insurance, why not get the kind that works? This is where things get interesting. My wife and I have decided to live life simply. We purchased our home last year for $47,000. The house, though in good shape and a place we love, doesn’t account for half this. The land where we can grow our own fruits and vegetables and raise a bit of livestock is the jewel of the property.

Land doesn’t need insured. Land is always land. I can’t know for sure, but whether or not the house we currently live in will still be here in 100 years is up for debate. Barring a cataclysmic event, our land will be. Let’s put it this way, our land doesn’t need insured because if it isn’t here next year, then that will probably mean we are no longer among the living, and even if we are, we’ll all have bigger problems to worry about than insurance.

So basically we have a house worth maybe $23,000 dollars that we have a 15 year mortgage on. We’ll probably pay it out well before then, but let’s assume we’re like most people and we don’t. 15 multiplied by $1,500 (This insurance price will only go up each year, by the way.) equals $22,500. In other words, as near as makes no difference, the value of our house to hedge against something that probably won’t happen, and even if it does happen, will probably only result in a few thousand dollars of damage.

What would it cost to insure our home with a company that might actually pay out if something goes wrong? As best as my research can tell, between $3,500 and $5,000 a year. Let’s do the math from the conservative estimate: $3,500 X 15= $52.500, Over twice the value of our house. If that’s not a long string on a small kite, I don’t know what is.

To those of us living the simple life, a bit of land is worth far more than a fancy house.
To those of us living the simple life, a bit of land is worth far more than a fancy house. | Source

Opinion

4.7 out of 5 stars from 3 ratings of this article

Another Way for Us Simple Folk

This got me thinking, there has to be a better way for those of us wishing to live simply to not be penalized for trying to keep life within our means. First let me qualify. If you want to live the highlife and can actually afford it, insurance does make sense. The math works. If you just want a nice and comfortable place to live, it just doesn’t. Paying more than the value of your house to protect it against statistically unlikely events, (Yes, even statistically unlikely in tornado alley.) just doesn’t make sense.

When we choose to have few things and the things we choose to have are not expensive, unless we are psychic, there is no scenario in which modern day insurance makes sense. But I do propose that there is a scenario in which those of us choosing to live simply can avoid property insurance, if only the money lenders would allow it.

Again using my own home as an example, if it were to be entirely decimated by a tornado, it still wouldn’t cost the full value of the home to repair it. The pad would still be here. The connectivity to water, electric, and gas would still be here. So considering this, the cost to rebuild would be less than $20,000, even less than that to just restore the home to an unfinished yet livable state.

Loans can be taken out to build, repair, or make alterations on a home. For those of us who live in inexpensive homes, wouldn’t it be easier for lenders to just make sure our credit would allow us to qualify for one of these loans rather than require we have home insurance? I mean if lenders are really looking out for our best interests and not in bed with the insurance companies, wouldn’t that be the sensible thing to do in such a scenario?

And let’s consider this: on the off chance that weather does impact a home, it is rarely more than a couple of thousand dollars worth of damage anyway. No, we may not have this money on hand, but if there are home improvement loans we can qualify for, isn’t that more sensible than paying for home insurance when we don’t even know if something bad is going to happen?

If we choose to live simply and within our means, doesn’t that afford us the luxury of not having to pay homeowners insurance? In such a scenario, against conventional wisdom, the math bears that we are better off to roll the dice and deal with problems when they actually occur, rather than pay insurance companies large sums of money (at least relative to the worth of our home) for things that may or may not ever happen.

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    • billybuc profile image

      Bill Holland 2 years ago from Olympia, WA

      Oh, Larry, of course I agree with you. Now you have me singing John Lennon's "Imagine." Insurance is a scam and always will be a scam. Your math is right on, very logical, makes sense...and that's the problem. You're making sense. :) Love your property and your lifestyle.

    • Larry Rankin profile image
      Author

      Larry Rankin 2 years ago from Oklahoma

      Billy: love your comments. You sound as fed up with insurance as I am:-)

    • AliciaC profile image

      Linda Crampton 2 years ago from British Columbia, Canada

      I like your reasoning, Larry, and I love the look of your land. It sounds like you've found a wonderful place to live.

    • Larry Rankin profile image
      Author

      Larry Rankin 2 years ago from Oklahoma

      Alicia: thanks so much for the kind words.

    • FlourishAnyway profile image

      FlourishAnyway 2 years ago from USA

      It looks like a very serene place to live. I'm not sure I could ever forego homeowners insurance myself. Weeks after graduating from college (before I moved out of state to a new job that awaited) my family's home burned down due to some wiring issues in the garage. Suddenly we had no clothes, no food of our own, no place to live, vehicles, fishing boat and even bikes burned. Insurance allowed my parents to rebuild an older home better than we had lived in and paid for many many months of temporary housing. BUT then Prudential dropped my parents because they had made a claim. They also even initially investigated the possibility of arson (trying to get out of paying). It was a major turning point for my father and made me wary. Be wise and safe, whatever you do.

    • Larry Rankin profile image
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      Larry Rankin 2 years ago from Oklahoma

      FlourishAnyway: thanks for the feedback.

    • CatherineGiordano profile image

      Catherine Giordano 2 years ago from Orlando Florida

      Very good advice. I found this hub just as I was evaluating my ome insurance policy because it has been creeping up. In Florida we have hurricanes. I think I was over-insured. I worked with the agent to cut back on the value of the house and its contents and ended up cutting the annual cost by about $400. I hope if I need the insurance the company will pay.

    • Larry Rankin profile image
      Author

      Larry Rankin 2 years ago from Oklahoma

      Catherine: it all really depends on the value of your house. My idea is that if it's not worth very much, it isn't worth insuring.

      Thanks so much for the comments and dropping by.

    • Paul Kuehn profile image

      Paul Richard Kuehn 24 months ago from Udorn City, Thailand

      Larry, what you say makes sense for people who don't have a lot of money to pay for homeowners insurance. I'm surprised that your insurance is so high for the value of your house. About 15 years ago, I lived in Maryland and had a house valued at around 500,000. My homeowners insurance through Allstate wasn't more than a $1,000 per year. Voted up and sharing with followers.

    • Larry Rankin profile image
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      Larry Rankin 24 months ago from Oklahoma

      Paul: thanks for dropping by. It seems like the more one's house is worth the more insurance makes sense.

    • Don Bobbitt profile image

      Don Bobbitt 24 months ago from Ruskin Florida

      Great Logic here, Larry!

      You have definitely piqued my interest and I will be looking at my own situation. That'a for sure.

      And I will be sharing this on my Retro-Survivalist site.

      Thanks for the analysis.

      DON

    • tillsontitan profile image

      Mary Craig 24 months ago from New York

      First let me say I love your property! Ok, now to the insurance. Just like car insurance, for the most part we are just supporting the insurance company.

      When you take out a mortgage why not add an extra $100 to your mortgage payment to be kept in escrow o r a high yielding bank account until your house is paid? That is the same amount as your house insurance and would yield about as much, if not more. However, at the end of your mortgage the money could be turned over to you as it is your money.

      There has to be a better way and your are spot on questioning this practice.

      Voted up, useful, and interesting.

    • Larry Rankin profile image
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      Larry Rankin 24 months ago from Oklahoma

      Tillson Titan: thanks do dropping by. Great advice.

    • Larry Rankin profile image
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      Larry Rankin 24 months ago from Oklahoma

      Don: I am glad you enjoyed the article. Thanks for the support.

    • PurvisBobbi44 profile image

      PurvisBobbi44 24 months ago from Florida

      Hi,

      Since our Homeowners Insurance went to $5, 012.oo we are self-insuring. I live in the country three miles from two volunteer fire department which are great, but it does not count when rated by the insurance company because we lived 13 miles from the nearest manned fire department. This is just a rip-off the insurance companies are doing to Americans.

      Our home is valued at $187,000 and was built in 1940's. It is a farmhouse given to us by my in-laws. It is on one acre of land. My girlfriend lives miles from a fire department in a 400,000 valued home and her insurance is only half of what mine was for years.

      I just got tired of the stupid rip-off insurance company and I might have to eat my attitude and words one day since we live in Florida---(Hurricanes and Storms.)

      I might have to live in a tent, but I will not be paying them a premium out of sight. Since I did not pay the premium the next year it was reduced to $4,000.00 and I thought KISS IT! Which is not nice, but I said it anyway.

      Thanks for letting me vent. If I did not have car insurance and life insurance I would not be insured.

      Bobbi Purvis

    • Larry Rankin profile image
      Author

      Larry Rankin 24 months ago from Oklahoma

      Bobby: the inconsistency of insurance companies can drive one crazy. They seem hellbent on only insuring homes that are newer at reasonable rates, when it is the older homes that have proven they can stand the test of time. Then when something goes wrong, it inevitably turns out your not covered.

      I don't mind you venting at all. It's an aggravating system.

    • bac2basics profile image

      Anne 23 months ago from Spain

      Larry, you are so right and when I move back to the UK I will be looking for insurance that isn´t overkill too.

    • Larry Rankin profile image
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      Larry Rankin 23 months ago from Oklahoma

      Bac2basics: thanks so much for the comment and the follow.

    • Mel Carriere profile image

      Mel Carriere 23 months ago from San Diego California

      As a person who has had two broken pipe incidents in my own home, I was glad I had the insurance, because I couldn't have paid for it, being stretched extremely thin trying to maintain this Southern California lifestyle as it is. You have a beautiful spread there in SWOK. I envy you. 47,000 on your large piece of God's green earth wouldn't pay for a front walkway hereabouts. Great hub, and I pronounce you mathematical genius.

    • Larry Rankin profile image
      Author

      Larry Rankin 23 months ago from Oklahoma

      Mel: yeah, a lot of places home ownership just isn't easy. My sister and brother-in-law live in LA and do quite well financially, at least by Oklahoma standards, yet I don't think they've ever honestly felt like they could own a home there.

      Our house is so simple, I could probably change out all the piping myself in a day or two. I would hate to lose my home or have it be damaged, but it just isn't worth enough for me to see insuring. All the things that matter to me are keepsakes and pictures and stuff like that. Insurance can't replace that anyhow.

      If I had a home that was worth 6 or 7 figures, I'd insure it, too,

      Thanks for dropping by.

    • MizBejabbers profile image

      MizBejabbers 23 months ago

      Larry, one thing you left out of the equation is liability. My husband and I are paying off our home this week, but we will still continue to carry insurance. Our underground house would suffer no more than $30,000 damages if a tornado hit. That might be to replace our attached greenhouse, three decks, and possibly some windows or doors that might be taken out. We discussed dropping the insurance for the very reasons you mentioned, however, if someone got hurt or killed on our property, we could be sued and lose everything. We will be downgrading the coverage to the physical property, but liability is still a big cost of the insurance. Since we live on a hillside and a trespasser (or utility meter reader) could fall down the hill and become injured, we will insure against this possibility. My neighbor rolled down the hill and broke both legs, so we know that can happen. Her medical copays for seven surgeries on her legs ran about $35,000.

      I agree with you in theory, but you didn’t mention anything about liability. Do you plan to insure yourself against other people’s mistakes?

    • Larry Rankin profile image
      Author

      Larry Rankin 23 months ago from Oklahoma

      Mix Bejabbers: I just don't understand why I should be liable for there being a hill on my land?

      Love the idea of the underground home, btw. thanks so much for dropping by.

    • MizBejabbers profile image

      MizBejabbers 23 months ago

      Larry, it isn't just the hill. I'm just as responsible if someone gets hurt at my house in town (flat yard) that my son lives in. It has been paid off for 4 years, but I still carry insurance. If one of his guests or even a trespasser gets hurt, I could get sued. It isn't fair, but it's the law in my state. Please check it out in your state.

    • Larry Rankin profile image
      Author

      Larry Rankin 23 months ago from Oklahoma

      Miz Bejabbers: I've heard of such laws, but not in OK. I could well be wrong, but I think liability is more reasonable here, especially in regards to trespassers.

      Here's my thinking, if I lay out spikes or land mines, I understand liability. If it's just the way the land is, I don't get it.

    • temptor94 profile image

      Ritu Temptor 22 months ago from India

      You have made some very good points. I never gave much thought to insurance and would go with it simply because we are supposed to, as a safety measure. You couldn't be more correct, even with the worst odds, the affordable insurances end up costing much more that the thing we are insuring. Insurance companies are like vultures and they are looting people by exploiting our insecurities. Great hub!

    • Larry Rankin profile image
      Author

      Larry Rankin 22 months ago from Oklahoma

      Temptor: thanks so much for the comments.

    • ladyguitarpicker profile image

      stella vadakin 22 months ago from 3460NW 50 St Bell, Fl32619

      Some good points in your article. I will not complain about the price of my insurance, it is cheap. $800.00 a year for $92,000 I only have a 1100 sf. house. Your house insurance is outrageous. I also have hurricane insurance even though I do not live on the coast. Great hub.

    • Larry Rankin profile image
      Author

      Larry Rankin 22 months ago from Oklahoma

      Lady Guitar Picker: I know a lot of people disagree with me on this topic. I think it all boils down to attitudes. The insurance companies just drive me mad, personally, but I understand your opinion.

    • sujaya venkatesh profile image

      sujaya venkatesh 20 months ago

      experiences differ Lar

    • Larry Rankin profile image
      Author

      Larry Rankin 20 months ago from Oklahoma

      Sujaya: thanks for the comment.

    • Gcrhoads64 profile image

      Gable Rhoads 17 months ago from North Dakota

      Why don't the lenders buy their own insurance instead of forcing the homeowners to do so?

      Makes sense to me.....

      Nah, it'll never happen.

    • Larry Rankin profile image
      Author

      Larry Rankin 17 months ago from Oklahoma

      Gable: lol, yeah, things that make sense tend to never come to fruition.

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