Nothing in this picture is insured, not the barn, not the hoop buildings, not the crops, not even the dog. I only insure that which would be financially devastating to replace. Am I a reckless wildman of the north woods? Or am I an astute businessman?
I go over my farm insurance with my agent nearly every year. A few years ago he pushed a paper across his desk and asked me to sign it.
“What’s this?” I asked.
“Oh, it’s just a waiver. The insurance company won’t insure the hoop buildings for wind or hail.”
“Hmmm,” I scratched my head and smiled. “What else could happen to them?” I asked.
“Oh, someone could take a knife and run along them,” he said, still trying to make the sale.
I thought to myself, “If someone is doing that, then I have bigger problems than hog housing.”
“I guess I’ll take my chances,” I said and pushed the paper back across his desk. “Let’s go over the rest of the policy.” Now I was in a cutting mood and starting to get the high a spendthrift feels upon finding a nickel.
“The barn is insured for $10,000,” he said.
The premium for the barn was $150. I thought about how little economically I use the barn. I keep a few square bales of hay and straw in the top and I keep my chickens, (which is a hobby), in the bottom. But I love that big, old, red barn. If I were to drop the insurance I would somehow feel like I was neglecting the barn.
“We both know it couldn’t be replaced for $10,000,” he said.
Never talk through the close.
I perked up. “You’re right, it couldn’t be replaced for $10,000.”
“But you could build something else, like a pole shed,” he stammered as he felt another premium slipping away.
I thought to myself, “If I wanted a pole shed, I would build a pole shed. What I want is this barn, and the only real insurance is to avoid fires, keep up the roof and structure, and pray.”
What I was in considering in actuality was a $150 lottery ticket which would pay out $10,000 and the only way to win was for my barn to burn down. I didn’t want any part of it.
So the test I came up with is, Could I afford to lose it? What I was left with is insurance on my house and garage and personal belongings for $200,000 for a premium of $316 per year. $500,000 liability for $82. $36 because I have a 4-wheeler. And an $18 policy fee which is unexplainable and would drive me crazy if I gave it much thought so I won’t for now.
So what do you think? Was I raised by wolves?
Curiousfarmer 
No, I think you’re very wise.
I’m not against insurance in principle, but I have minimal insurance for several definite reasons:
1. You’re subsidising thieves. I’ve lost count of the times that I’ve heard people boast about how they added loads of things to the list when they got burgled. They seem to think insurance companies are fair game because they’re “big business”. This drives up premiums.
2. You’re paying for idiots. If you’re a careful and responsible person, you’re still paying premiums where the average is influenced by a lot of reckless and stupid people. There are a few ways to reduce premiums by proving that you’ve taken certain steps to minimize loss, but these don’t influence the overall equation much.
3. Somewhere in your policy is a clause or sub-clause that basically gives the insurance company an “out” for any circumstances. They don’t always use it, else no one would buy insurance, but it’s there. Like for car accidents, if you’ve had any kind of ticket, even years before, and you didn’t tell them, they can find out and decline your claim.
4. The Paperwork. You have to factor in the time and effort preparing and filing your claim and waiting for their decision. In many cases it’s worth it, but not always.
5. The economics. Insurance companies always make a profit. Despite the reckless and dishonest people making claims. That means that obviously they take in more than they pay out. Which means that for a careful person you are very, very unlikely over your whole life to get more from an insurance company than you give them. Putting money into an safe interest-bearing investment from which you withdraw to pay for losses is very likely to see you ahead in the long run.
Having said that, I do have car insurance even though I don’t have to (it’s not a legal requirement where I live and I own the car outright). Why? Because I might get distracted one day and hit a new porsche that belongs to an aggressive lawyer. The misery, hassle and expense of something like that far outweighs the modest cost of the insurance.
If I had kids I would have plenty of life insurance.
Well-said Chainey! I too have liability coverage on my car.
And your comment about life insurance is right on. Each person needs to decide which insurance is right for them. Don’t let the salesman scare you into buying what you don’t need.
The problem as I see it is that Insurance is constantly being misused by the consumer.
It was originally intended to cover catastrophic occurances, (house buring down, leg getting severed, etc, but today you can go in to the doctor with any little sore throat or sniffle and get medication that in may cases is covered by insurance. Since this type of occurrence is much more frequent than that of a disaster, there is a constant cost to the insurance companies and premiums need to be higher to compensate for this.
I go with high deductible on all of my insurance in order to keep my premiums low. A sore throat or sprained ankle doesn’t send me to the doctor. (although a severed leg probably would) This seems to take the edge off the price of the premiums a little bit.
I do also have an umbrella policy, which costs $7 per month for $5 Million in liability coverage over and above my homeowners and auto policies. I have opted to cover more on the high end as I have income properties which expose me to potential “slip and fall” lawsuits.
When I found out that property managers are the most sued profession I thought that $7/ month is a cheap hedge against this threat.
Insurance is just in case something may happen, not saying it will but is nice to know you are covered in case something happens. I happen to know i have sold 1000’s of insurance policies over the years and so many people are thankful they had them just to be safe.