Quote:
Originally Posted by TomSpasm
I've lived in Central Florida since 1984 - 20 years in the Tampa Bay area, 6 years in Sarasota, 1 year here. I have never met anyone, or know anyone who knows anyone, who's house has been damaged, much less burnt down by lightning.
Could it happen? Yes. Is it a smart investment? No. Just my opinion...
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Insurance is a tool for financially "hedging your bet" in advance of a low-probability, high-impact event. You can buy it from a company that spreads the risk around to a large number of policy holders, or in some cases you can purchase/install hardware that reduces the risk of the adverce event.
Just because it's never happened to us, or a family member, or a friend doesn't reduce the risk. I've got a friend who built his home about 50 miles from the coast line on the gulf coast and didn't want to pay the exorbitant premiums the insurance companies wanted to charge. (He built his home himself...without a mortgage.) Since he didn't have a mortgage company to tell him insurance was a requirement, he chose to not have insurance. A hurricane destroyed his home. He rebuilt in the same spot...smaller this time. Still didn't buy insurance; he figured since it had already happened to him once, he was "good" for the rest of his life. A couple years after he rebuilt, another hurricane destroyed his home for a second time. He's rebuilt again...smaller home again (he's running out of money)...and now he has insurance.
I lived on Cape Cod for many years. One winter during a heavy snowstorm, we experienced a dramatic lightning storm. A neighbor and good friend who lived about 3 blocks away had his home struck by lightning. It did significant damage but luckily he was home at the time and was able to extinguish the fire himself. (The paper on the paper-backed fiberglass insulation caught fire.) If he hadn't been home the house would have burned to the ground.
Just because I've known people who have suffered some of the low-probability, high-impact events doesn't make it more likely it will happen to me. Just because you've never known anyone to suffer any low-probability, high-impact event doesn't make it less likely it will happen to you.
Insurance decisions should be based on likelihood of occurence (based on data) and the impact on you personally (based on data). How likely is it to occur? What is the impact on you if the unthinkable happens?
As I was retiring and contemplating whether a unique life-insurance product (that's available to only those in my industry) was a good investment I had a prophetic discussion with a friend/co-worker whose retirement date was a month after me. He said "How long do you plan to live? It's a great investment if you're going to die next month and a bad investment if you're going to live for another 40 years. So how good are you at predicting your future longevity?" We both bought the insurance. Six months later he died of a heart attack. That life insurance was a great investment for him. I hope to live long enough to make my life insurance decision a terrible investment.
Given that we're in the lightning capital of the US, I'll invest in whatever I can to protect my house from lightning...and will still hope it's never hit thus making my decision a bad investment!