Dropping Home Owner's Insurance (Winter Park: home owners insurance, homes, buy)

[Tampaite]

Originally Posted by nucat78

Say what? No. I used to be in financial services. The market returns 6-7% annualized historically over many years. We are seeing a lot of very high returns right now but that's because we are coming off a crash. Contrary to get rich quick advocates, you cannot time the market except by luck.

Please do your own due diligence before investing in anything...

Well, lets say you are right..if the market returns 6-7% over many years and I have a 30 year mortgage at 6%..why would I invest a dime in the stock market or in bonds when I can just pay down the mortgage and get the same return??

[Tampaite]

Originally Posted by Town&Country

Its called insurance for a reason... that is one item I'd never cut out of the monthly bills. In Florida anything can happen, especially during the rain season/hurricane season. Sinkholes yes I could see but to completely devoid yourself of any recall would be unwise imo.

I know why the insurance exists but are you really paying for something that's likely to happen?
You won't be paying for something that won't happen right?

Google 'Dutch Book Theorem' for more ideas on how Insurance companies make money off of us.

[housingcrashsurvivor]

Originally Posted by Tampaite

Well, lets say you are right..if the market returns 6-7% over many years and I have a 30 year mortgage at 6%..why would I invest a dime in the stock market or in bonds when I can just pay down the mortgage and get the same return??

Keeping in mind that I do not presume growth in this economy, however, in your given scenerio & question, the answer is because money invested can grow over time via compound interest (assuming reinvested dividends) while money borrowed on a fixed rate reduces in value over time via typical inflation.

So if you have a $400/month mortgage payment during a typical period of 3.5% inflation, then the first year you pay $4800 and the second & third & so on years you also pay $4800; but the second year your $4800 is only worth $4632 and the third year it is worth $4469 and the third year it is worth $4313 so that in 10 years your original $4800 is now worth only $3360. In other words, the very same 4800 now would buy 30% less goods and services than it would have bought you 10 years ago, yet this is the only money you need to use to pay off a debt which used to cost you the full $4800/year which used to buy $4800 worth of goods & services.

Whereas, if you invest $400/month which grows 6% annually then in 10 years you've got not $400 x 12 months x 10 years, which would be $48,000, but rather you'd have ~$75,660 or about 37% more (minus inflation, of course).

[LKJ1988]

I paid cash for my house and have no INS. The price to insure a home on the gulf in west Pasco is insane and cost around 18k a year not including flood INS. Just to insure a small 2bedroom shoebox is around 5k a year.

[nucat78]

Originally Posted by MeInDenudinFL

Not true! There are a handful of funds that return over 9% over a long period of time, say, a decade or more.

Such as?

What are the management fees, open ended, close ended, minimum buy-in, holding period, redemption fees, ST cap gains vs LT cap gains? Just because a fund "returns" 9% doesn't mean you walk away with 9%. That's why you read prospectuses VERY carefully...

[nucat78]

Originally Posted by Tampaite

Well, lets say you are right..if the market returns 6-7% over many years and I have a 30 year mortgage at 6%..why would I invest a dime in the stock market or in bonds when I can just pay down the mortgage and get the same return??

Oooh. Aside from Crash's post on PV and FV of money, here's the deal as I see it. Any kind of investment has to be looked at in a broad context. You have to consider your financial needs and goals, your personal tax situation, the utility and liquidity of your money, and how risk averse you are. You also need to consider diversification - the housing market has crashed, the stock market has crashed, jobmarkets have evaporated at one time or another. And if you believe the current prophets of doom, Florida will be largely underwater soon...

Some people should not be in the stock market, some people should not own a home, some people should put 100% of their 401(k) in guaranteed interest investments, and so on.

I used to tell people that anything that kept them awake at night was a bad investment, regardless of the return or anything else.

(And if you're wondering, I got out of the biz because my management was pressuring us to foist off unnecessary insurance products on people because the residuals were so high.)

[housingcrashsurvivor]

Originally Posted by CHASLS2

I paid cash for my house and have no INS. The price to insure a home on the gulf in west Pasco is insane and cost around 18k a year not including flood INS. Just to insure a small 2bedroom shoebox is around 5k a year.

Apparently having money which affords self-insuring a house so expensive that it would cost $18k/yr through an insurance company is not enough cash to purchase the class required to restrain from insulting the homes of those with less money for insurance & housing, but just enough to proffer in gall a suggestion that someone with less money should risk the home over their head which they can not afford to self-insure.

[BillyBobJoeBobWilly]

Originally Posted by mikexit

As a Realtor, a question I get asked is, what will insurance cost. So last week I had a Long Island cpl come down. We saw a nice house and put in an offer. At the same time I contacted a local insurance company........there arent that many in S Hill. The house was $140k, the insurance valued it at $240k, so of course the premiums reflected that......Its ridiculous, they have you over a barrel. We have artificially high insurance to cover where hurricanes/storms actually hit, SE FL, not here. Its a scam and as usual the politicos in Tally have all been bought.

Agreed... Insurance Companies are whores. Houses are built to fall apart or burn down.. if I could build mine my way I'd drop all but liability.

[LKJ1988]

I don't have hoi and never needed it.

[tinytrump]

I have renters ins-just because you never know- the idiot upstairs might go to sleep smoking and cause a fire, the rain brought a nice lightening bolt right through the roof causing water damage to my apt- the neighbor's kids on drugs and ransacks my apt with paint n steals all my electronics, the other drunken dingbat next door may apply accelerator instead of breaks one night and run into my wall,, get the picture? be prepared- cause life happens.