Ditch the insurance

Many of us pay into insurance schemes because this is what sensible people do. Sensible sucks. Sensible is Beta. Sensible is death to the soul.
Self insuring is the act of having sufficient funds to deal with life. You have access to this money and so there is no longer any need to pay someone else a premium for access to theirs.
The great thing about self insuring is that it is stress relieving. Normal insurance simply exchanges one set of problems for another. First you buy insurance so that you do not need to worry about something going wrong. Then (when something does go wrong) you worry about the small print of the insurance contract. This is too much like work for me. I would rather just pay for things as they come up.
The only downside to self insurance is that quite a lot of cash is needed to set it up. An insurance company does not have assets to realise every possible claim that may arise- far from it. This means that it is possible to be covered for many thousands of pounds of risk for just a penny or two a day. Only a tiny proportion of their policies will result in claims on any particular year and so companies write many more policies than they can ever pay. This was all very well until the credit crunch came along and shrunk the value of their investments. This caused some companies to become insolvent.
By means of self insurance and a low debt lifestyle it is possible to insulate oneself from the rickety financial structure that threatens to sink us all.
In order to do without insurance one must know what it is.
Insurance is basically rented liquidity. An individual finds that he cannot be without an item (such as a home or a car) and yet he cannot hold sufficient funds to replace it. He therefore rents access to another persons money by paying an insurance premium to an insurance company.
Insurance can be a profitable alternative to holding cash. Prior to the crunch many corporations used it as a means to create debt fueled financial empires. Many of these empires no longer exist because insurance is never (quite) the same thing as cash.
So why are companies and wealthy individuals so adverse to cash anyway? The most liquid investments have the lowest returns and they may can boost their returns by holding less of it- until they go broke. It all worked quite well for 'sophisticated' investors for quite a long time.
Most household insurance is bought out of habit. This is a hugely dangerous thing to do with money.
You may find the following cost/benefit analysis useful even though the examples are from my own life.
Ditch the Trade Union.
Trade unions are basically an insurance policy against unfair dismissal. Unfortunately there is no one to insure us against unfair treatment by the union itself. If we are unfairly dismissed it will probably be because we are too white or too male for some government quota or other. This sort of discrimination is completely ignored by the unions and objecting to 'positive' discrimination is likely to get one labeled as a reactionary.
A better solution is to be six months in advance with the mortgage. This will not stop the union from stitching you up but it will mean that you are not all that worried about it. This is because the government will help with your mortgage once you have been unemployed for six months. It is the first six months that kill you.
Ditch the contents insurance.
Household contents insurance always sounds a good idea. The trouble is that you must insure everything or nothing. Who has ever heard of carpets being stolen?
In reality you need only a few hundred pounds insurance because burglars steal only portable high value items such as laptops. This may be done by paying additional sums into your mortgage account. These mat be painlessly withdrawn either by missing a payment (tell them first) or asking for a refund.
Ditch the credit insurance.
You may have credit insurance without knowing it. If this is so you can cancel it and apply for a refund under UK law.
Credit insurance only really covers the lender and not the borrower- but you pay the premiums not them. It is far better not to take out the loan or to have investments to cover the repayments.


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