4 ms·

> "If losing $25k is life changing, you should pay some money to reduce the risk." What about the risk of your insurance company going bankrupt? Or the risk of

• tspiteri 8y ago
  I said reduce the risk, not eliminate it; or make the probability distribution narrower, not collapse it to one value.
• tzs 8y ago
  > What about the risk of your insurance company going bankrupt? For most insurance ordinary people would have, except possibly life insurance [1], coverage comes into effect fairly soon after you pay your premium. If your current insurance company is showing any signs of insolvency, you should be able to switch to someone else and get covered. If there were no warning signs that your insurance company is in trouble and they unexpectedly go bankrupt, but at a time when you don't need to make a claim, you can quickly switch to someone else. If they go bankrupt and you are making a claim, it should be covered by your state's guarantee fund. Insurance is a regulated industry, regulated by the states. Part of that regulation includes the state establishing a fund paid for by the insurance companies that is essentially insurance that the insurance companies can pay claims. If you pick a large, diverse insurance company, probably the only real risk that they might unexpectedly go bankrupt at a time when you need to make a claim, and the state guarantee fund might not be able to cover it, would be during some major widespread disaster that causes severe damage over a wide area. You might be screwed then, although there will probably be some kind of Federal disaster recovery aid available then. [1] I have never looked into details of life insurance so am not sure how that works.