« on: July 11, 2014, 06:15:18 PM »
Insurance is a casino game between you and the insurance company in which the odds are stacked in their favour. Many years ago, I was given the advice that you insure yourself only against events that happen very rarely and are too expensive for you to cover. If you can afford to replace your gear, then don't insure it because the insurance companies have the odds stacked in their favour - they make a profit because on average the insurance premiums cost more than the cost of repairs and losses.
So I take it that you don't insure your house or car either? Of course insurance companies are out to make a profit, they can't provide that service for free! The model is for them to spread the risk over many in hopes of reducing their risks and keeping the premiums lower for everyone in the group. That's just how it works.
If his house is not too expensive for him to replace with pocket change, he would be ahead to not insure it. I stop insuring my cars, except for liability once they are a few years old, its a losing bet. I once had a homeowners insurance loss of about $5,000. This was after paying insurance for 40 years with no losses. The insurance company cancelled my policy. I lost a lot of $$ on that, If I'd have invested that insurance $$$ in the bank for 40 years, I could buy a new house. Of course, by mortgage company would not allow that.
Life insurance is the same story. Bet a insurance company that you will die, and you will most likely lose. They know the odds, and always win.
Many larger companies are self insured, or only purchase insurance for catastrophic losses, they know the cost well.
I have some rather wealthy friends that recently claimed that home owners insurance was a middle-class invention. I'm not sure if they've changed their tune after their home burned to the ground.