Wednesday, November 18, 2009

Do You Gamble?

Las Vegas. Monte Carlo, Casino Morongo. All great places to spend your hard earned money in the hopes of winning big. Let say that I am in no danger of becoming wealthy but what if you could get a $200,000 jackpot for a $1,600 bet? Would you do it? You probably would.

Now lets look at insurance. You pay your insurance carrier $600.00 for the year. Your house is insured at $250,000 for total rebuild including debris removal. Your house burns down. You pay your insurance carrier a $1,000 for your deductible. They rebuild the house and spend $200,000 doing it.

You just paid $1,600 for a $200,000 pay off. You won!

Want a bonus spin? Your insurance carrier helped pay your living expenses like rent where you lived while they put the house back up plus paid for your personal property that was destroyed or damaged in the fire as well. Lets say that rebuilding your home, replacing your personal property like clothes, TV, computer, etc. and the rent for 6 months while all this was getting done is $300,000. You only spent $1,600.

You might say you've paid for insurance for years and never had a claim so it must be a waste? I agree, it is a roll of the dice as to if you will have a fire, your home could get broken into or any number of other things could happen. But one day you might win.

Another thing to consider: If you had a fire or if someone drove into the house at 2 am, would you have the money to pay for the repairs yourself? How long would it take to put enough money in a savings account? You would have to pay taxes on the interest, have the will power not to touch it even for that new TV or for school clothes, and you would have to be able to get at it in the event of a major disaster. The insurance company set that money aside in the event you needed it. You where lucky when you did not need it. Someone else probably did. Now it's your turn.

$600 a year does not sound like to bad of an investment in your own security and peace of mind, does it?

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