Do You Have to Have Insurance?

If you didn’t have to have insurance, be it car, home, or business insurance, would you? It’s an interesting question. Many people would probably say no simply because they don’t want to pay for it or think it’s a needless expense. Others would say yes, because they understand the purpose of insurance, even if they don’t care to pay for it.

I started thinking about this in response to a text message I received over the holiday weekend from a client. She wanted to know whether a landlord is required to carry insurance on a rental property? The answer is, not if there’s no loan for the rental property. Similarly, many car owners illegally cancel their car insurance once they’ve obtained an inspection sticker or tags because they don’t want to pay for it. In both cases, neither one sees the benefit or purpose behind having insurance.

The true purpose of insurance is to offload or share risk of financial loss incurred by a potential claim. In the case of the rental property this loss could be due to a fire, tornado, or some other event and the financial loss for a car would be due to an accident of some type.

To avoid carrying the sole financial risk the property owner agrees to pay a small amount of money for the policy while the insurance company agrees to pay a much larger share of money if the home or car is damaged. For example, if the cost of a car insurance policy is $1,000 a year and the value of the car is $20,000, it makes great financial sense to share that risk with an insurance company. The same can be said for the rental property. If the home is worth only $100,000 and the cost of a landlord policy is $1,500 or even $2,000, then it makes smart financial sense to share that risk.

There may be an even greater risk at stake than the value of a car or rental property. In both instances, car insurance and landlord policies also include personal liability coverage. This coverage is what protects the car owner and the landlord in the event they are sued for negligence, either from an accident or not taking proper care of the rental property. Liability claims can be much costlier than the mere value of either asset. Sharing the risk may prove to be invaluable for the owner.

For some, there may be the false appeal they are getting away with something or beating the system by not carrying insurance, but the law of averages indicates that it will catch up with them at some point. I personally can’t imagine not having car or home insurance even if the loans on both were paid off. It only takes one liability claim to completely wreck someone’s financial position. What do you think? Share your thoughts, questions, or experiences with me on my Facebook, Google +, or LinkedIn pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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