Self-Insuring Rental Properties

[Ben Parr]

Has anyone ever looked at self-insuring wholly owned rental properties rather than paying an insurance company?

I've been toying with this idea for a while. Obviously it only makes sense after reaching enough houses that you can take advantage of some of the law of large numbers. Also, I would only think about covering the dwelling itself, and still using an insurance company to cover liability claims.

I can't wait to hear everyone's thoughts.

[John Chapman]

I subscribe to the notion that you should only insure on things that you can't afford to take a loss on. (Not very articulate) I generally don't carry collision on my car because if it's totaled I can afford to replace it. I think self-insurance probably makes sense once you reach a certain point of financial reserves, if you are disciplined and put a certain amount each month to cover the inevitable damage. My understanding talking to insurance brokers is that total losses are very rare, and it's more likely to be a partial loss, which, if you have reserves, you can cover yourself. (This is for my area, I don't how it is, for example, Tornado Alley).

On the other hand, you've got to have liability. Period. Unlike a dwelling, there is technically no limit to your loss. I say this as a plaintiff's lawyer.