[Kirby64]

What do you consider catastrophic loss? I’ve found in home insurance the delta on lower deductibles isn’t that meaningful and when something happens, the pay out is almost always worth it. Something like water damage from a burst pipe can be 20-50k very quickly, and having to pay a 10k deductible is quite a big hit in addition to the remediation needed.

[monster_group]

By catastrophic loss I mean an event that has the potential of causing bankruptcy (such as house burned to the ground). Home insurance rates vary a lot depending on where you live so our math is likely very different and we both could be right. While a big expense in one shot definitely pinches more, paying higher premiums every year, the annual premium hikes, in addition to raised premium for subsequent years due to filing a claim can also add up to a lot surreptitiously.

[Kirby64]

Total loss being the bar seems crazy to me. A 20-50k unexpected expense for almost everyone would essentially result in bankruptcy or at minimum insolvency and long term debt.

That means you would need to hold enough money in short term accessible money (HYSA, etc) to self insure in that scenario, which is unachievable for most people.

Insurance should set a maximum cap to your pain no matter the circumstances… and I think the pain being >50k is quite unreasonable unless we’re talking about property that is worth in the millions.

[monster_group]

Your point is perfectly valid. There is no single right answer. It just depends on what risk level one is comfortable with and that varies from person to person.

[Kirby64]

I’d agree there’s no single right answer, but I think generally a risk profile for an insurance product that is so outsized against you seems like a poor decision.

This isn’t like putting all your money in meme stocks or something, this is more akin to selling risky stock options. The downside potential is massive and essentially uncapped, whereas the upside potential is meager.

[monster_group]

Downside is not "essentially uncapped". That would be the case if I did not have insurance. I do have insurance - one with high deductible with a fixed maximum loss that I am willing to accept should such an event happen.