On Buying Insurance
The insurance company almost always wins. That single fact is the whole post.
Insurance feels like safety. But if they win on average, you can’t just buy everything. You have to choose.
The rule I landed on: insure the loss that would wipe you out. Pay for the small ones yourself.
Insurance is really a bet on rare events, and people judge those badly. If you want to train the instinct, Chance Lab lets you run the dice thousands of times and watch how randomness actually behaves.
Health: the one I can’t skip
We get private health insurance through my employer. It’s a fixed necessity — the same bucket I flagged in FIRE, the one you can’t negotiate away.
We chose a high-deductible plan with an HSA — a health savings account. A big out-of-pocket bill is unlikely for us right now, so the low monthly premium wins. The HSA money goes in untaxed and grows.
Healthcare is the big wildcard in any early-retirement plan. One option I wrote about: spend time in a lower-cost country, where the same care can cost a fraction of the US price.
House and car: raise the deductible
A deductible is what you pay before insurance pays anything. Raise it, and the monthly cost drops.
House insurance: high deductible. I’m covering the disaster — the fire, the total loss. Not the small repair.
It still surprised me once. A hail storm damaged a roof. We filed the claim. The insurer paid out. I thought everything was covered. Then the bill came. The actual replacement cost about double the payout. They covered half. The rest came out of pocket.
That’s the lesson I didn’t expect. Even insured, the payout isn’t the loss. There’s a gap, and the gap lands on you. “I’m insured” is never the same as “I’m covered.”
Car insurance: minimum coverage, high deductible, same reason. And the cheapest accident is the one that never happens.
I had a slow-speed collision once. The driver ahead filed a medical claim. (I told that story in the car post.) That taught me the real risk in driving. It isn’t my car. It’s hurting someone else.
So I lower the risk itself:
- I sleep 8 hours. Healthy, safe — and it quietly lowers my premium too. Tired driving is a bigger risk than most people believe; the research is in Why We Sleep.
- When I drive, I drive. No distractions.
- Feeling sleepy? I sing out loud first. Then I pull over.
I even gave up camping. It ruined my sleep, and tired driving isn’t worth a weekend.
Travel insurance: good on paper
I found this one only recently. On paper it looks great. In practice, the math runs the other way.
Think about who holds what. In an emergency, the insurance company holds the money. You hold the receipts. You collect the evidence, file the claim, and wait on approval — while stressed and far from home.
And they can still deny the claim. For anything I could cover with cash — a delay, lost luggage — I’d rather just have the cash.
The cushion under all of it
Insurance is a wonder when the loss is big enough to ruin you. It’s a slow leak when the loss is small enough to absorb.
So I keep emergency money. That cash is my self-insurance. It pays the high deductibles, the travel claims, the minor collisions — all the small losses. No premium. No fight.