A Bit Less for Luca

Guest Post by Eric Peters

Insurance against potential damage usually costs more in actual damage – to your wallet.

The insurance company is betting on this being true. Insurance – from the perspective of the insurance company – is all about not paying but being paid.

By you – to them.

The scales are most unevenly tilted for the responsible, who rarely – if ever – file a claim for damages caused by themselves.

The secret being that most claims are not the result of an angry and capricious Zeus who without warning jerked the steering wheel hard left and caused the car to veer off the road but rather the consequence of an inattentive or inept driver. Those who are neither rarely have what are styled “accidents.”

For them, insurance is an very bad deal – one that involves annual payments made for harms not caused which, over decades, can easily add up to many thousands of dollars that could have been spent on something of actual benefit to the responsible person who worked hard to earn those dollars.

Things like doctor bills – which many people can’t afford because they have paid so much for insurance instead.

Which is why, of course, the responsible – who are also usually bright – have to be forced to buy insurance. No one who’s not stupid says yes to a bad deal if they don’t have to.

So they are made to.

But, there are still legal ways to limit the extortion – which is what forced insurance is, by definition. As unpleasant as that non-delusional definition may be; the truth, as the saying goes, sometimes hurts – especially when it involves facing up to our own powerlessness before the extorter –  who has the backing of law, some thing much more potent than a thug’s gun in the small of one’s back.

The first such way is to always pay cash for your car – so you can skip paying for “comprehensive” coverage, since you’re still free to assume the risk of physical damage to your car. If there is a lien on your car, the lienholder – rightly – obliges you as part of the lien to cover the risk of damage to what is still functionally his car, no matter whose name appears on the title.

But if you are the sole owner, you can say no – ah, the feeling! – to insuring against physical damage to your car. Which is a very smart thing to do if the car is worth less than $10,000 since anything more serious than a very minor fender-bender will almost certainly result not in the car being fixed but being thrown away (i.e., “totaled”) due to the fix-it costs which attend owning a modern car, especially one with air bags.

Most people do not realize how catastrophically expensive air bags are to replace when they deploy. The driver and passenger bags take the steering wheel and most of the dashboard with them when they deploy – and the typical fix-it cost for that alone is often several thousand dollars. Before any bent bodywork has been fixed.

If the car is worth $10k, $5k in fix-it costs will usually total it.

It’s true, the insurance company will give you a check – but it will not replace the car because it is guaranteed to be for an amount less than the car was actually worth to you – leaving you to pay the difference it will take to replace it with an equivalent car.

You are better off putting money in a mason jar – and counting on the car not being totaled. Which – assuming attentiveness and competence behind the wheel – is likely not to happen. You will now have money to fix for fender-benders out of pocket (mason jar) too.

Which brings up the second way to limit how far Luca shoves his hands in your pockets (as he shoves a gun in your back).

It is to buy no more than the bare minimum required liability coverage which the state forces you to buy. You can say no – ah, the feeling! – to hysteria-hyped additional coverage based on actuarial tables which (again) assume the worst and which worst is rarely visited upon the responsible and prudent, the careful and competent.

If you never cause (italicized to emphasize the point – and to point out who gets sued) an “accident,” then you will never be liable for any damages.

So why pay for them?

Sure, it’s possible in a moment of inadvertence you might cream a toddler who wandered into the road and be sued into the poorhouse. But how likely is it?

Calculate the odds of something like this ever happening vs. the certainty of paying say $150 dollars more each year which you didn’t have to.

Now add it up.

Over the next twenty years, that comes to $3,000 – a tidy sum. It’s enough to put a new transmission in your car, which is something you might actually need – and which you now have funds to pay for.

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