Self-Insuring For Life In Abundance
Adrian B Early, Ph.D., MBA, CFP®
Chief Investment Officer, shareGRO™ Practice
Insurance: An ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table.
– Ambrose Bierce
Education is what you get from reading the small print; experience is what you get from not reading it.
There was a very cautious man who never laughed or played He never risked, he never tried, he never sang or prayed. And when he one day passed away, his insurance was denied, For since he never really lived, they claimed he never really died.
– Anonymous poem
Finance serves two purposes, growing wealth, and protecting or guarding it. Insurance can be a solution to guard against risks we can afford, and fear may happen. Here are some insurance types to consider:
|Protection goal / Purpose:||Insurance Type:|
|1.||Pay healthcare needs||Health Sharing Networks or Health insurance|
|2.||Avoid losing income by death||Life Insurance|
|3.||Provide income while alive||Annuity (Typically for retirement)|
|4.||Pay for nursing or other care||Long term Care (LTC) Insurance|
|5.||Cover income lost to Disability||Disability Insurance|
|6.||Homeowner’s||Homeowner’s (Property & Casualty, P & C Insurance)|
|7.||Auto||Auto (Property & Casualty Insurance)|
|8.||Liability coverage||Liability bundled in Homeowner’s and Auto insurance|
|9.||High liability coverage||Umbrella liability policy, typically in multiples of $ 1 Million|
You can buy some or all these forms of insurance. But the nature of insurance is that you fear and want coverage for some event like your house burning down, getting cancer treatments, or dying too young to support the family. Insurance firms know probabilities, write contracts to exclude many payments they might make, and build claims and underwriting review that you pay for, so they do not spend “too much” on claims. Insurance firms WILL win on average, your lifetime premiums going to company shareholders and expenses. Wealth solves issues that ACTUALLY ARISE, not ones you fear. So, growing wealth consistently will almost certainly grow means to a better life. Insurance will, usually (very few exceptions over a lifetime) extract profit and expenses from your life and finances. Which do you prefer?
There is an old structure making a huge revival in health cost coverage, the health sharing network. A caring community shares losses and expenses participants did not expect. When a health issue and expenses arise, administrators of the network seek reasonable cost containment, but WANT expenses covered for the benefit of the participant, not avoided by an insurance company. These expenses are paid out of current fees from the health sharing community. Avoiding expenses is not the goal.
The outline of self – insurance, with enhancement by stored capital or wealth is:
- Share from less than insurance rate pricing on a range of risk types (Health, Life, LTC, Auto, etc.).
- Add cash flow of 10% into a risk – coverage personal endowment from the sharing amount. This can reduce sharing amount “cost”, or you can remove it for other reasons, like to grow capital.
- Reduce sharing amounts (due to individual and group “experience”), and of self – insurance of larger (not – shared) initial amounts. Insurance solves temporary cash flow issues, but does not typically return more to customers than they pay in; the growth is of wealth, not sharing “costs”.
May your wealth grow, and protection costs be modest.
© 2017 shareGRO™ Practice