Self Insuring Your Home?

[TripleB]

Does anyone self-insure their home? What would be necessary for you to be comfortable doing so?

I've been thinking of eventually retiring and settling down in Florida. The biggest problem I've run into is home owners insurance. Due to various tight state regulations, no private insurer will issue new policies.

Thus, the state of Florida runs its own insurance company called Citizens to offer insurance. The price is very high, but it's state-regulated to prevent the cost from getting too high, much like a public utility that is required to justify increases in price to the government.

Before this morning, I really disliked Citizens based on what I've heard, and what I feel about public-private nonsense. Essentially, since the government has given them a monopoly by creating artificial market restrictions (i.e. making it highly infeasible for another insurance company to operate), Citizens is theoretically free to operate poorly, and pass the higher rates down onto customers, since the state can't allow them to fail, and the state can't give them money, the state must allow them to raise rates, and since people can't buy insurance elsewhere, it raises the cost of insurance.

Then I read an article this morning in the news that Citizens is the subject of a $500 BILLION dollar class-action lawsuit due to recently changing their valuation software such that the valuation price is 2.5x the current market value of most homes.

(http://www.miamiherald.com/2012/02/07/2 ... es-to.html)

Citizens is now requiring policy holders to pay for fare more insurance than the replacement value of their home. And since it's a monopoly, tough shit. Under normal conditions, Florida home owners insurance is about 2% to 3% of the value of the home due to hurricanes. If they are valuing the home at 2.5x the actual value, then you are paying almost 10% of the value of the home in insurance. That's unacceptable to me.

My first thought about ditching homeowners insurance all together is (a) can't do that if you have a mortgage. Solution is to buy a house outright in cash. This is fine because my plan would involve me moving there in retirement.

Thought (b) is: what if someone slips and falls on my sidewalk? Home owners insurance covers that. Solution is to put all of your assets in creditor-protected vehicles. Florida protects 100% of homes and 100% of annuities from creditors. The federal government protects retirement accounts. Set yourself up so if someone gets hurt and tries to sue you, they can't take anything, so let them try. It's the government's fault for making the insurance market so unfavorable through artificial restrictions, and then running a terrible public-private insurance company. I don't feel unethical about this, and it's not my fault if someone wants to intentionally get hurt and sue me frivolously.

Thought (c) is: what if a hurricane knocks the house down? Perhaps I can build a small home from the ground up with concrete instead of regular building materials. I doubt it could be that much more expensive. Maybe 10% more cost in construction to make it 10x less likely to be destroyed in a hurricane. Seems worth it considered a lifetime of saving on insurance payments. (I'm thinking a 1000 square foot home will be plenty for my needs as I don't want children or a wife and I've lived comfortably in half that).

Thought (d) is what if a fire destroys the place? If I am constructing the home from scratch, I can do my best to build it in such a way that keeps fires from spreading (concrete is great at that), include a sprinkler system in every room (it's not like the movies where it goes off easily and everywhere. It takes a lot of heat to set one off and only individual units go off at any time, it doesn't ruin the whole house), and make sure my electrical system far exceeds regulations.

There's always the risk of a wildfire or a category 5 hurricane or an airplane falling into my house. However, if I am saving 5% to 10% of the purchase price of the house, per year, it seems as though self-insuring could be the way to go. I may be able to get renters insurance for my property inside the home, but maybe not unless I put the property in an LLC and leased it to myself, which would eliminate my Florida asset protection (As it only works for the primary residence of a person), so that might not be feasible.

Thoughts to such a plan?

[murphy_p_t]

have you thought about renting & putting your equity into the PP (or your VP)?

[TripleB]

have you thought about renting & putting your equity into the PP (or your VP)?

That's what I'm currently doing. Unfortunately, there's several things I want to be able to do that are incompatible with apartment living. Additionally, at a certain point I will run out of creditor protected space once I save more money, and those assets are exposed (i.e. once I am maxing out my 401k, IRA, and annuities and still have left over money to save). I need to live in Florida or Texas in a house that I own, in order to increase creditor protection to protect myself against a personal black swan event that even umbrella insurance won't cover. Is it likely? No, but that's why it's called a black swan event.

[jackely]

I've been thinking of eventually retiring and settling down in Florida. The biggest problem I've run into is home owners insurance. Due to various tight state regulations, no private insurer will issue new policies.

If this is true, it's news to me. A few years back they actually loosened regulations allowing insurers more freedom to pick and choose their customers. I was offered a policy by a private company called People's Trust. Because my house was determined to be super-hurricane proof my rate when from almost $3k to $800/year the first year.

[TripleB]

I've been thinking of eventually retiring and settling down in Florida. The biggest problem I've run into is home owners insurance. Due to various tight state regulations, no private insurer will issue new policies.

If this is true, it's news to me. A few years back they actually loosened regulations allowing insurers more freedom to pick and choose their customers. I was offered a policy by a private company called People's Trust. Because my house was determined to be super-hurricane proof my rate when from almost $3k to $800/year the first year.

I researched the RE situation in Florida about 5 years ago. If they've loosened regulations and private insurers are issuing new policies, then this is terrific