When do you need to buy insurance?

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I think this is a very common thing: at the car rental counter, the clerk asks “do you want to buy the comprehensive insurance”, and/or buy the full tank of gas, so that you don’t need to fill up the car when you return it.

My answer is always, no. Except once I probably bought the gas when I was on a business trip, and the reason, was the trip before that one, my colleague and I tried to fill up the gas at the last minute, and rush to the airport terminal. We didn’t buy the gas for that one.

In America, we always need to buy the liability insurance for car/driving. Comprehensive insurance is required if we have car loans (the loan company or bank need that). I think the requirement is similar for the home insurance.

For rental car, I believe liability insurance from our own car transfers while comprehensive/collision don’t. For the latter, I do have a credit card that offers “primary insurance coverage” – basically means if applicable, the credit card issuer can pay for the damage of rental car. The card has an annual fee.

Self Insure

This March, we rented a violin for our younger daughter, as we plan her to take the violin lesson from April. The violin shop asked us maybe helpful to add the violin to the home insurance, or buy the insurance from somewhere. The violin is worth about $950, btw. My wife bugged me a few times about insurance. And I said we are self insured. Meaning, if our daughter accidentally damaged the violin, I will pay for it.

Years ago, I worked for a coal mining company, and the company self insures all employees health insurance too. They still have a health insurance company to administrator it, but the mining company takes all the risk. It was year 2012, and coal mining company’s deals with quite big amount of money, in terms of the equipment and mining side of the things. Note this has been changed in last 10+ years, as the natural gas replaced coal as the main load for power generation, and the renewable energy (wind, solar) grew significantly too.

I assume this likely included nuclear power

Warren Buffett on when to buy insurance

Warren Buffett, who is both the greatest investor of our time, as well as an expert on insurance, explained the need about insurance at about 44 mins mark of the video (he talked about 5 minutes on the topic). Below are most quotes.

There are two reasons a company (or a person) needs to insurance. The main reason to buy insurance, is to protect yourself from the loss, the loss you are unable or unwilling to take or bear yourself, this could both be objective or subjective. Sometimes a manager could ; the second reason is the price of insurance is favorable to us.

YouTube: BRK 1995 annual shareholder meeting

What insurance do I have

I have a term life insurance. Bought in year 2011. It’s 15 years. I think it will be more expensive if I buy now – due to aging. At the time I bought the policy, my older daughter is one year old and my wife didn’t work outside home. Another reason is I was changing jobs, and the life insurance policy at work place cannot be carried over between jobs. A side note, after I left my 1st employer in the US, I learned from my former boss once at the Macy’s that one of my coworker died suddenly, and he was younger than me. To make things worse, in his benefits selection, he seems didn’t select the company paid life insurance policy (or in other words, he didn’t opt-in, there was no cost). It’s just overall a very tragic situation. That’s the main reason we need to have a life insurance on the bread-winner.

I have car insurance (comprehensive) and home owner insurance (mortgage requirement). The cars are paid off, but comprehensive insurance helps in the case if we got in car accident: this actually happened last year when our 2012 Camry was totaled, and the insurance company seems worked for us well. They raised the premium afterwards, and I just switched to new insurance co. One thing I personally recommend, is the roadside assistance and the rental car reimbursement option, if applicable. I use AAA for roadside assistance, and I also work from home (we have 2 cars, both WFH) and that’s why I don’t add “rental car reimbursement”.

Health insurance through employer. This is common in the US. Another option is Healthcare market place (Obama care).

Bonus question: Extended Warranty (EW)

Our current 2 cars (one Camry and one Sienna) are both preowned certified. One common question is do we buy the “extended warranty” from the 3rd party provider (dealer always pushes for this). I bought it for Sienna in year 2013 as I just wanted to leave. I thought it was probably $1,200 for 7 years (100,000 miles, whichever comes first). The only time I used it is for roadside assistance (I do have AAA too, but wanted to use the service from Extended Warranty once. If I had saved the money myself, I would probably paid off the cost associated with the squirrel (rodent). Last year, with the preowned Camry, the dealer offered EW again. I recall it has tiers, and the cheapest is over 7k, and I declined.

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