From debt free to bill free

All of our insurance - including life - lets you choose the way you want to pay. Monthly, quarterly or one lump sumper year. You can choose but of course the longer you take to pay the more you pay. And don't be late or bounce any payments. One lump sum per year gives you a 10 to 15% discount depending on the policy and your record with the company. If you pay monthly or quarterly and something happens wherein you have to make a claim part way through the term of your contract you still have to pay the rest of the yearly premium. The balance is usually taken off the insurance claim payout.

We bought our place in 1985 and paid it off in ten years.We have no debts, no vehicle just bikes, no home insurance and only public health insurance paid for by the 15% tax on all goods and services in the province. Our set expenses are our yearly property tax. bi-monthly light bill and monthly telephone bill. Property tax is $500 a year, light bill averages $50 -$60 every two months as we are careful with usage and the telephone is $35 a month. We grow most of what we eat for both the animals and us. A little extra animal feed cost about $50 monthly and I spend about a $100 a month at the grocery store for items we don't grow. Probably $25 a month at thrift stores for clothes etc. Internet is free at the library and sometimes works at home too although I don't know why? It isn't picking up from neighbors as they all have secured internet. We save for things like eye glasses and dentist appointments. That is as cheap as we can live presently.

Vanet - thanks for the head's up on this thread!!

Yes, we have insurance and it's not something I'm willing to go without. Our homeowner's insurance is tough because we live near the water so have very few choices in who to use but I have to say, we've invested quite a bit of money into this home and I'd hate to lose my investment. Yes, it's a million dollar home (well, OK - it depreciated a bit to probably $950,000 - LOL) and I like it here. If it were damaged, I'd like to be able to rebuild and with what we earn now, there would be no way to do that. So we have insurance.

Health insurance is a no brainer as well. We have it through our employer and it's a high deductible insurance so we already get the discounted rates from the doctors thanks to the insurance. We've already gotten back what we've paid in (we pay a small amount each month but even if we paid what the company pays) multiple times over!!

So what I'd do if I had to try to decrease the bills is to work at trying to get the coverage that we need for the best price. It might mean shopping around and changing companies. Our employer changes medical insurance every year or two just for this reason.

We also need to figure out what are "needs" and "wants" and decide if we can decrease the cost of the needs and if we can eliminate the "wants". Unfortunately, life costs so we just need to figure out where we can decrease the costs.

Some are not willing to go without insurance, and I understand that. However, often we delude ourselves into thinking we have needs we dont have. I wont go into how much a person can save by paying cash, that has been throughly covered. But lets take homeowners insurance for example.

All of you who come up with that $1,000,000 price on your house. Where do you get that number? Often it is some overinflated "value" some real estate agent or insurance agent gave you based on what the thought it might sell for. In reality, if you figure out what it would really cost to rebuild it, the number is a lot less. Land is the one big variable. It can vary enormously from place to place. But how many disasters would cause you to lose the land? Not many. So what you are really insuring is the building. The recent economy correction showed us, that our houses arnt really worth what we thought they were worth.

One recent example, happened to my brother in law in Phx AZ. He bought a house in one of the nicer suburbs of Phx back in the 90's. He paid around $250K. Over the years, as they lived there lives it kept growing in value until it appraised for over $650K at one point. FF to today. That house recently sold for $74K. So what is it really worth? Well it could have been built for around $80k in materials and labor. The variables are profit for all the middle men. The sub contractors, the builder, the real estate agent, etc.

So how much do you need in the bank, or hard money to not have to carry insurance? Well if in the 90's when they bought the house, they had had $250K obviously they wouldnt have needed insurance. But if you go by the rebuilding cost. It would have been closer to the $80k figure. Now FF to today. If they had $50K in an average mutual fund. Today they would have $80k today, which would be enough to rebuild. But it gets better. If they had $50k in hard money (ie silver or gold) They would have over $200k more than enough to rebuild the house twice. Not to mention how much they would have saved not paying insurance. Now what if you could build the house yourself. I built my House completely by myself. By the time it was done I had about $54K into it even though it appraised for Over $350k. So in order to self insure I would have needed $54K in cash or better yet hard money. With that amount in either gold or silver my $54k would be more than $150K in real money 16 years later and my house is still standing. Every month instead of giving the insurance company $250 more dollars just what homeowners insurance would cost. I just buy that much silver or gold. Also keep this in mind. What are the chances that your house is going to burn down, you are going to get cancer, you total your car all at the same time. The numbers are ridiculously small. So what I am saying is you can self insure all of your needs with the same account. Are you taking a risk. YES, all of this is what is called in the industry "risk manangement" we all do it every day. We just dont think about it. When we get into a car, there is a percentage of risk, that we will have an accident, a percentage that is smaller, that we will total the car, still a smaller percentage we will die. We take a risk every time we do anything many of which we cant calculate. But they are still there.

How many of you would rather have a couple of hundred thousand dollars in the bank, instead of a piece of paper from an insurance company when a major problem arises. It adds up much faster than you think. Plus we all know the Ins. Co. might not see things the way we do, and might not pay at all, or pay way less than they should. Just something to think about.

The value of your house (and outbuildings) for the purposes of property insurance is based on the replacement cost. How much it would cost in today's market to rebuild the house.

It is not based on real estate trends. Right now the value to replace (rebuild) my house (which is what I am insuring) is $120,000 less than the real estate value of my house in my area. Which is why if there was a disaster I would want to have the funds (insurance) to rebuild my house even if I never wanted to live in it again. To sell.

If you read the break down of your policy you will see the amount of insurance for each category - the dwelling building, private structures, personal property etc.

The cost of mortgage insurance is based on how big a mortgage you have, your down payment (how invested are you personally) and your credit history.

There is no such thing as real estate insurance which is why when people overpaid for houses during the hot market they were left owing more than the house was worth when the market crashed.

What you should have said is the value SHOULD be based on replacement cost. It almost never is.

I get what you're saying and I think some here could do this....but the vast majority of the folks on this board (or anywhere) are not going to put savings/investments away till they've amassed a couple hundred thousand. Any savings on insurance premiums would get eaten up by the demands of everyday life....it's just not feasible for most.

Also, when our friend's home burned to the ground the insurance replaced contents and personal belongings too....the receipt for every dish, shirt, book, lamp, etc went straight to the ins company. Just replacing all of that would have cost them another fortune on top of rebuilding costs. You need your ducks in a row though...she had pictures of everything and receipts scanned into her work computer. Insurance tried to stall, but even they couldn't argue with her documentation.

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I'm not easy to live with, I know that it's true. You're no picnic either baby...

Don Henley

I disagree but then I don't know which insurance companies you deal with. The ones I deal with in business and personal life all base their property insurance on replacement cost. It is clearly marked on the contract. Nothing to do with real estate trends.

You are right, unless a person is very young, they cant just go cold turkey. They work up to it. First you do your car. How much is it really worth? How much liability do you carry. Minimum, which is 15K in az is carried by almost 85% of people. So you start putting money aside every month until you have 15K in real money(or whatever number fits you), and then cancel your car insurance. Now you take the money you where spending on car insurance, and put that into investments until you can drop your homeowners or healh, or whichever is next on your list, it will be different for everyone. The money doesnt get "eaten up by real life" because you are not using your grocery money, you are using money you already spend for insurance. You will start to see it snowball as you cancel one after another and increase the money you are investing.

It is much harder for us older folks if we didnt start when we are young, but it can be done, espesially if you invest wisely and cut your living expences so you have more to invest.

I started this when I was 25, so I didnt have to replace a lot, because I didnt have a lot. But by putting my money first in mutual funds, then in precious metals, I have gotten 2 or 3 major boosts. 3 times over the last 25 or so years, the price of gold and silver has jumped like crazy. More than trippleing my investment all of which went into buying more. It adds up in a hurry. The mutual fund do the same thing. Even though they go up and down, over the long haul everything increases in price so they do as well.

When it comes to investing mutual funds are more consistant, but metals better keep up with the world.

What I am saying, is not that they dont try to base it on replacement cost, they all do. BUT They dont know the replacement cost. When I was in Insurance, and studying to get licensed. I asked how they came up with what they were using as replacement costs. All the companies admitted, (and we dealt with more than 40 and all the ones in the top 20 in the country) it was a guess, usually made by the customer. They do sometimes start with a chart, which was out of date, and also an admitted guess. and then go up from there based on what the customer wants.

The conversation would usually go like this. Q: how much is your house worth. A: I am not sure, it appraised about 3 years ago for X amount.Q: Let me look up the county records and last sale price. A: OK sounds good. Q:Well the tax asessor says this, and the last sales price was this. What do you think? A: Well we think we probably need x amount what do you think? Q: Well I have written several in your general vicinity and they all have this much. A: Ok sounds good.

The bottom line is the number written in replacement cost, is usually figured out just like above, and any number can be put there real or not as long as you pay the premium they will insure for anything you want.

Unless you are a builder and are very familiar with the current cost of plywood and the like you have no idea what it would cost to replace your house and neither does the insurance Company. OSB, a major building material in most new houses, has gone from 6.99 a 4x8 sheet, to 14.59 a 4x8 sheet. That is more than double in less than a year and that is just one of the thousands of things that goes into building a house.

I am not bemoning you. I am sure you did your very best to get an actual figure at the time. But the records show that most houses are hugely over insured and are based on a real estate appraisal or sale.

The bad news, is most insurance companies want it this way. Why? Because they base your premiums on the higher number, but when you have a loss they send out an appraiser and value everything at a much lower number, and pro-rate that number for age. What happens to the difference, you guessed it, it goes into there pocket.

Yep - ours is full replacement cost including all contents.

Again this is not how things are done where I live. The insurable value (replacement cost) of your house is determined by the government assessment which is issued yearly. Physical inspections take place when the house is built and once every 7 or so years. This assessment is formulaic in between and a copy is required by the insurance company before you are quoted a premium. It is used for property tax purposes . The insurance contract makes allowance for up to a 15% error in replacement costs. In other words they absorb anything over but you don't get paid cash if the replacement comes in under. As for undervaluing and pro-rating for age. Not if you have full replacement coverage.

ONe year we thought we would drop our house insurance. however we still had a mortgage and they wouldn't let us. It lapsed for a month or so. Then we put the insurance back on and just 2 weeks later three trees tumbled into our roof! now that we are debt free, mortgage free we still keep house insurance on the house. It cost almost 4 grand to fix our roof. At the rate of $500 a year, its cheaper than replacing our house. We took away the big trees but who knows what might be next

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Until it happens a second time and then they deny you.

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And a little known fact on car insurance. Most states allow you to self insure. You need to have a $20k-$50k guaranteed bond but you are taking not only a risk with yourself but with others. Medical bills aren't cheap.

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U.S. Constitution -10th Amendment
The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.

It depends on the state. In AZ it is $15k. BUT it can be in an interest earning mutual Fund. That way you are insured and drawing interest. Another nice thing about being self insured, you dont get sued vey often. Many people exagerate there damages once they know they are dealing with a large insurance company. Since they know many Ins. Co. will just settle rather than go through the bother and cost of litigation. This usually doesnt happen with self insurers, since the lawyers know there isnt much to be had.

Umm - If you injure me in a car accident, I don't care if you have insurance or not. You WILL pay for my medical bills and loss of work.

That is interesting. I still dont think with the way prices change in building they can be very acurate. But it is definatley much different from here. Also the full replacement coverage has nothing to do with pro-rateing. Full replacement only kicks in, in a total loss situation. Most insurance claims are for partial loss situations, ie toilet overflows washing machine tube breaks etc. In most of these cases we see companies pro-rateing the replacement. It is VERY rare for an insurance Co. to give someone full replacement cost on a damage that happens several years after something was installed. It is called indemnification. It simply means the insurance co's. only have the obligation to return you to where you were before the loss. So there position is you had 15 year old linoleum, in your house, they will only pay you for the value of 15 year old linoleum. The problem I have with that, is they keep your rates the same as your house ages. So you continue to pay the same (or more likely More as you get rate increases) but your coverage contiually goes down as your house ages. It is just one more way insurance Co's cheat you out of money.

Easy statement to make, a bit more difficult to back up. What if... the person who injures you is the typical dead beat who owns nothing of value and or cannot be found readily? That type floats around like dandilion seed heads in the breeze.... and there are so many of them all identical its kinda tough to tell which one is the guilty party. Ask me how I know this.

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"Nothing so needs reforming as other peoples habits." Mark Twain

Yeah, not on a happen in many cases...can't get blood from a rock.

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