Posted On: September 16, 2005, 5:21 pm CDT

Posted By: Mark

Jay,
I find it interesting that so many people feel like paying insurance premiums is the same as making deposits into a savings account. Let's see... my home is worth approximately $185,000. My annual homeowner’s premium is $530. If I were to cancel my insurance, and save that money in a cookie jar, after 30 years I would only have $15,900! It would take 350 years for me to save up the $185,000 that my house is worth. What would I do if I had a total loss? That's why I have insurance. If my house burns to the ground tomorrow (a covered loss), I am fully protected by the big, bad insurance company. Oh, and I’ve only been paying premiums for 2 1/2 years!

Now for another lesson... Say you hire a contractor to build a sunroom on the back of your house for $10,000. You sign a contract for this, and he gets started. About halfway through the job, you tell the contractor that you expect him to build you a pool at no extra charge. Do you really think he will do it for free? I don’t think so. Oh but wait, maybe you can get your neighbors to pay for the pool! After all, just like insurance, you haven’t paid the full amount for what you expect, a sunroom AND a pool/wind damage AND flood damage. And your neighbors, like the other policyholders, can pay the difference!

Enjoy your new pool, but your neighbors won’t be around to enjoy it with you. They all moved to a new state, where the cost of a sunroom is reasonable and their neighbors don’t mooch off of them.