4 ms·

No one, including companies, should not be forced into contracts they don't want to enter into. In practice, you are going to find they are never arbitrarily d

No one, including companies, should not be forced into contracts they don't want to enter into. In practice, you are going to find they are never arbitrarily doing it. They are doing it because the price no longer covers the cost of providing the insurance. Just like when I decide the price of X isn't worth it anymore, I stop doing the transaction. The reasonable response would be to increase the price, but in some situations it's not possible due to regulation.

j45 3y ago
Except when those companies have lobbied to create laws to make the use of their industry mandatory.
- Analemma_ 3y ago
  I could be wrong, but I don't think there are any states where you are required by law to have home insurance. The issue is that banks won't underwrite a mortgage for an uninsured house, because without insurance it's a completely unsecured asset whose value would go to zero at any time. (And if a bank won't write a new mortgage for it, the value drops dramatically even if it's already paid off, because now the potential market is limited to cash-only buyers for a risky asset) You're free to go without insurance on a house that you own, but so long as the bank owns it, they're going to make insurance mandatory, and that has nothing to do with lobbying.
  - epolanski 3y ago
    You are not wrong at all. Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.
  - marcosdumay 3y ago
    > whose value would go to zero at any time No, it wouldn't. It would go down to the value of the land (where a construction is permitted). Nowadays, that's often more than 90% of the price.
    - robocat 3y ago
      > value of the land Only very approximately - it depends on contextual situation. We had a ton of uninsurable "as-is" houses after the Christchurch Earthquake. Prices for those houses dropped massively because without a mortgage you only get cash bidders so demand was relatively low compared with supply. The price someone is willing to pay for an as-is property depends on many factors, and it can easily be below land valuation. Firstly desperate or naive sellers would accept well below the land value. You assume that that there are enough buyers to compete. There were not enough buyers shortly after the quake because not enough had cash so there were very cheap properties. Plus you were buying risk too - you simply couldn't price correctly because there were too many unknowns - when whole suburbs are uninhabitable a new construction is irrelevant. The city population dropped significantly. You could offer below land value on some properties because you are also purchasing a liability e.g. the council required some houses to be demolished & removed (demolition costs were tens of thousands - and demo companies were busy as fuck). You might pay a lot more than land value: • Some places could still be rented (uninsurable is not uninhabitable) so potential income mattered. • Many places just needed work done - sometimes not much - but often a new foundation e.g. lift house and put in new foundation. New foundations had to be compliant with earthquake strengthening rules so usually very very expensive. The as-is homes were often sold by the insurance companies because they were uneconomic to fix. I advise everyone to be very careful buying property in suburbs or cities where all houses have common/correlated risks of an event - floods - fire - etcetera. Insurance premiums will rise until it is unaffordable - then all houses will not maintain value. Disclosure: I do live in a flood prone suburb but I can afford to self-insure and most people cannot do that. Even worse: insurance did not cover the financial losses for many people in the Christchurch Earthquake. Especially small businesses. Then again - many other people ended up with huge payouts and were financially much better off. However even then money is usually a poor substitute for emotional costs.
    - positr0n 3y ago
      Woah, where can you buy a house that 90% of the money you spend is land? Is that even true in expensive downtown US cities like SF and NYC? Construction is pretty expensive too.
- toast0 3y ago
  Car insurance isn't mandatory; proof of financial responsibility is. In California, you can get a compliant insurance policy, deposit $35k with the DMV, setup a compliant $35k bond, or a self-insurance certificate which requires a larger deposit and is really for commercial motor vehicle carriers. I don't think it's unreasonable to require means to pay for damages when operating a motor vehicle; it doesn't take much to cause damages well in excess of California's deposit amount; washington state requires $60k. For home insurance, usually it's a mortgage requirement, which is not by law. In condominiums, the community may require it of individual owners, and then it's not really law either.
  - tptacek 3y ago
    Side note here on how ludicrous it is that you can substitute a $35,000 bond for a real insurance policy, given the likelihood that any driver is going to cause losses far in excess of $35,000.
    - creato 3y ago
      The 35k bond doesn’t preclude getting sued for an unbounded amount. Presumably the idea is that a 35k bond demonstrates you have more available in case of a judgment. That said, that seems like a risky idea in a world full of LLCs, trusts, etc.
      - dragonwriter 3y ago
        No. it demonstrates exactly the same minimum ability to pay as the alternative minimum deposit or insurance coverage, which are also $35k.
      - tptacek 3y ago
        Not having any insurance coverage at all doesn't preclude you from getting sued for an unbounded amount.
    - toast0 3y ago
      Minimum insurance in California only covers the same $35,000. $15,000 for injuries to one person, $30,000 for injuries to multiple people, and $5,000 for property damage. It's completely insufficient, but it's not nothing. A reasonable person would carry much more insurance.

j45 3y ago

Except when those companies have lobbied to create laws to make the use of their industry mandatory.

Analemma_ 3y ago
I could be wrong, but I don't think there are any states where you are required by law to have home insurance. The issue is that banks won't underwrite a mortgage for an uninsured house, because without insurance it's a completely unsecured asset whose value would go to zero at any time. (And if a bank won't write a new mortgage for it, the value drops dramatically even if it's already paid off, because now the potential market is limited to cash-only buyers for a risky asset) You're free to go without insurance on a house that you own, but so long as the bank owns it, they're going to make insurance mandatory, and that has nothing to do with lobbying.
- epolanski 3y ago
  You are not wrong at all. Home insurance isn't mandatory, but refinancing your mortgage is impossibile without one.
- marcosdumay 3y ago
  > whose value would go to zero at any time No, it wouldn't. It would go down to the value of the land (where a construction is permitted). Nowadays, that's often more than 90% of the price.
  - robocat 3y ago
    > value of the land Only very approximately - it depends on contextual situation. We had a ton of uninsurable "as-is" houses after the Christchurch Earthquake. Prices for those houses dropped massively because without a mortgage you only get cash bidders so demand was relatively low compared with supply. The price someone is willing to pay for an as-is property depends on many factors, and it can easily be below land valuation. Firstly desperate or naive sellers would accept well below the land value. You assume that that there are enough buyers to compete. There were not enough buyers shortly after the quake because not enough had cash so there were very cheap properties. Plus you were buying risk too - you simply couldn't price correctly because there were too many unknowns - when whole suburbs are uninhabitable a new construction is irrelevant. The city population dropped significantly. You could offer below land value on some properties because you are also purchasing a liability e.g. the council required some houses to be demolished & removed (demolition costs were tens of thousands - and demo companies were busy as fuck). You might pay a lot more than land value: • Some places could still be rented (uninsurable is not uninhabitable) so potential income mattered. • Many places just needed work done - sometimes not much - but often a new foundation e.g. lift house and put in new foundation. New foundations had to be compliant with earthquake strengthening rules so usually very very expensive. The as-is homes were often sold by the insurance companies because they were uneconomic to fix. I advise everyone to be very careful buying property in suburbs or cities where all houses have common/correlated risks of an event - floods - fire - etcetera. Insurance premiums will rise until it is unaffordable - then all houses will not maintain value. Disclosure: I do live in a flood prone suburb but I can afford to self-insure and most people cannot do that. Even worse: insurance did not cover the financial losses for many people in the Christchurch Earthquake. Especially small businesses. Then again - many other people ended up with huge payouts and were financially much better off. However even then money is usually a poor substitute for emotional costs.
  - positr0n 3y ago
    Woah, where can you buy a house that 90% of the money you spend is land? Is that even true in expensive downtown US cities like SF and NYC? Construction is pretty expensive too.
toast0 3y ago
Car insurance isn't mandatory; proof of financial responsibility is. In California, you can get a compliant insurance policy, deposit $35k with the DMV, setup a compliant $35k bond, or a self-insurance certificate which requires a larger deposit and is really for commercial motor vehicle carriers. I don't think it's unreasonable to require means to pay for damages when operating a motor vehicle; it doesn't take much to cause damages well in excess of California's deposit amount; washington state requires $60k. For home insurance, usually it's a mortgage requirement, which is not by law. In condominiums, the community may require it of individual owners, and then it's not really law either.
- tptacek 3y ago
  Side note here on how ludicrous it is that you can substitute a $35,000 bond for a real insurance policy, given the likelihood that any driver is going to cause losses far in excess of $35,000.
  - creato 3y ago
    The 35k bond doesn’t preclude getting sued for an unbounded amount. Presumably the idea is that a 35k bond demonstrates you have more available in case of a judgment. That said, that seems like a risky idea in a world full of LLCs, trusts, etc.
    - dragonwriter 3y ago
      No. it demonstrates exactly the same minimum ability to pay as the alternative minimum deposit or insurance coverage, which are also $35k.
    - tptacek 3y ago
      Not having any insurance coverage at all doesn't preclude you from getting sued for an unbounded amount.
  - toast0 3y ago
    Minimum insurance in California only covers the same $35,000. $15,000 for injuries to one person, $30,000 for injuries to multiple people, and $5,000 for property damage. It's completely insufficient, but it's not nothing. A reasonable person would carry much more insurance.