# Is home insurance really necessary?



## crgf1k (Aug 8, 2015)

I just bought a house for $132,000. It's the worst house on a nice street, so the lot alone is probably worth $90,000. Home insurance will be about $650/year ($54/month). I'm on a very tight budget as I'm living on interest from my investments. $54/month would make a substantial difference to my already tight grocery budget, so that is why I'm questioning buying home insurance. If the worst were to happen, I feel like I could absorb the loss from a house fire by selling the lot and buying an even cheaper house, or just renting an apartment. My personal belongings aren't worth very much.

It seems to me that if the insurance company is willing to accept $650/year to insure a property, they have calculated that the odds of the house burning down or someone having a disabling slip and fall accident on my property are very unlikely. If it's very unlikely, is it worth me definitely paying out the equivalent of the returns from $30,000 invested in a GIC every year? 

Also, there are two large trees on the property, with two expensive houses on either side. My understanding is that your own home insurance pays to fix your house, even if the tree or branch was on your neighbor's property...as long as the tree owner didn't ignore any warnings or signs of a dangerous tree. So I'm thinking in order to protect myself from this kind of liability, I would have these trees inspected by an arborist on a yearly basis. If some branches need trimming or maybe a tree will need to be removed eventually, at least I've saved $650/year to put toward that.

Thoughts?


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## OnlyMyOpinion (Sep 1, 2013)

My thought is that you'd be nuts to have no insurance. 'Unlikely' is exactly what you insure for.
It is not just the house value but liability you are insuring for as well (including those trees regardless of the tree doctor's diagnosis). Somebody gets injured, etc. 

We learned the value when one of the houses we own burnt a few months after we bought it - judged unlikey but it happened. It was also not much of a house at the time, but replacement costs ($120k) meant the end result was a very nice little house. 

If $54 a month is a stretch you shouldn't be a home owner, and you sure as hell shouldn't be my neighbour.


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## crgf1k (Aug 8, 2015)

Here's an article explaining how being a responsible tree owner can pay off. Sure a neighbor could still sue...but if my insurance company isn't responsible, will they pay for a lawyer to defend me? 

https://www.thestar.com/business/pe...ghbours_tree_falls_in_your_yard_who_pays.html

I realize this is an unusual question, but to assume that every retiree on a fixed income and living in a house that paid for, should pay hundreds of dollars per year for home insurance, I think is unreasonable. At some point, depending on the net worth of the person, the value of the house, and the cost of the insurance...it seems like insurance would at some point not make financial sense.

Here's another way to look at it. I often risk my life by choosing to ride my bicycle next to traffic, and drive my car on the highway with transport trucks, purely for recreational purposes. Is there serious risk? Absolutely...and not just to my savings....to my actual LIFE. I could choose to stay home to avoid this risk, but I don't. So if I'm willing to take that kind of risk, why should I be so terrified of not having home insurance? It seems to me that the odds of me getting seriously injured or killed while zipping around on the road is greater than the odds of having something catastrophic happen at my house which is completely stationary.


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## smihaila (Apr 6, 2009)

OP, in the interest of transparency and lack of conflict of interest, I would recommend that anyone replying to your question should clearly disclose whether or not they are a home insurance agent trying to sell services or bringing FUD.
I'll start first - I am in no way connected to home insurance industry.

That being stated, I'd like to say that your question and situation does perfectly make sense. People are mostly forced into purchasing home insurance in the situations when they are not actually owning a house which they say are owning, namely, when it's the banksters having paid for it and you still have to pay the banksters usury in return for the "favor".

If you are truly owning your wooden barrack (I wouldn't call "houses" the odd and feeble structures that we typically see anywhere in North America, but I disgress), weigh in the risks vs. advantages, and decide. The conclusion, in most of these cases, is that paying home insurance to this hidden mafiotic group named "insurance industry" is not beneficial to your financial well-being.

Oh, to the other poster illustrating the risk of riding a bicycle as example of things that may go wrong and possibly requiring insurance: super funny. Ok, let's do it all like the Swiss folks, and require mandatory BICYCLE INSURANCE. What a world we're living in, bleah...


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## sags (May 15, 2010)

Penny wise and pound foolish......comes to mind.


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## mark0f0 (Oct 1, 2016)

Its not just the risk of a fire. Its the risk of a flood. Its the risk of someone slipping and hurting themselves (even if completely without merit, the insurance company will hire a lawyer to defend you against a baseless claim). I find it hard to believe a lot is worth $90k in a city where a SFH is worth $132k. In the hypothetical case of a fire, there will be a significant chunk of change to clean up/rehabilitate the lot back to a condition where a house could even be rebuilt or the land abandoned/sold. There could also be liability, from the mere fact of having a fire on the property (ie: your neighbors or their insurance companies may take action against you if the fire spreads and causes their properties to suffer damage).

Even with car insurance, I don't buy insurance against the loss of my $1000 vehicle. But I sure as heck do buy insurance against my vehicle causing someone else, or even myself, damage. Your neighbours' insurance would sue you without hesitation if your trees caused insured losses to your neighbours.


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## crgf1k (Aug 8, 2015)

mark0f0 said:


> Its not just the risk of a fire. Its the risk of a flood. Its the risk of someone slipping and hurting themselves (even if completely without merit, the insurance company will hire a lawyer to defend you against a baseless claim). I find it hard to believe a lot is worth $90k in a city where a SFH is worth $132k. In the hypothetical case of a fire, there will be a significant chunk of change to clean up/rehabilitate the lot back to a condition where a house could even be rebuilt or the land abandoned/sold. There could also be liability, from the mere fact of having a fire on the property (ie: your neighbors or their insurance companies may take action against you if the fire spreads and causes their properties to suffer damage).
> 
> Even with car insurance, I don't buy insurance against the loss of my $1000 vehicle. But I sure as heck do buy insurance against my vehicle causing someone else, or even myself, damage. Your neighbours' insurance would sue you without hesitation if your trees caused insured losses to your neighbours.


There's no basement and the whole town is sand, so a flood is unlikely. Interesting point about being sued by neighbour's insurance company from fire or heat damage though. But then wouldn't it come back to negligence like with the tree maintenance?


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## Just a Guy (Mar 27, 2012)

Home insurance covers your liabilities as well as your property. Should your house burn down, and the neighbors catch fire as well (probably would regardless of any trees), it would cover their expenses. Should someone slip and fall on your property, it would cover your liability. In some municipalities you'll also be charged the cost of emergency services responding (so the cost of putting out the fire). 

Remember too, you are insured for replacement cost, not house value. It costs more than 40k to put up any house these days. 

If something were to happen, you'd most likely be responsible and lose more than just the house value in the process, you'd most likely be facing personal bankruptcy as you'd be responsible for associated costs you couldn't cover. Now, usually you can't lose your house but, given the case where you only own a lot (after a fire), I'm not sure what assets you'd be allowed to protect.


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## Eclectic12 (Oct 20, 2010)

smihaila said:


> OP, in the interest of transparency and lack of conflict of interest, I would recommend that anyone replying to your question should clearly disclose whether or not they are a home insurance agent trying to sell services or bringing FUD.
> 
> I'll start first - I am in no way connected to home insurance industry ...


Me neither ...




smihaila said:


> ... That being stated, I'd like to say that your question and situation does perfectly make sense. People are mostly forced into purchasing home insurance in the situations when they are not actually owning a house which they say are owning, namely, when it's the banksters having paid for it and you still have to pay the banksters usury in return for the "favor".


Depends ... with or without a mortgage, the claims I have had were not for the house burning down so the bank wasn't involved. Friends of my parents had their house burn down while they had a mortgage so the bank was involved.




smihaila said:


> ... If you are truly owning your wooden barrack (I wouldn't call "houses" the odd and feeble structures that we typically see anywhere in North America, but I disgress), weigh in the risks vs. advantages, and decide. The conclusion, in most of these cases, is that paying home insurance to this hidden mafiotic group named "insurance industry" is not beneficial to your financial well-being.


Unless one is disconnected from the sewer system, how does one "weigh in the risks" of a backup?

In my case, the blockage was eighty feet from the clean out pipe ... which was clearly not on my property. This didn't change that four feet of dry wall, all the flooring (wet or not), replacement dry wall and painting had to be done.

The insurance company initially said they'd be asking the city for compensation but gave up.



Bottom line line for the OP how lucky do they feel?

If they skip the insurance where nothing happens ... it is all good. If they can't afford $650 / year, there's lots of things far more expensive that can happen.


Cheers


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## Zipper (Nov 18, 2015)

My thought is I'm sure glad you are not my neighbour.


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## sags (May 15, 2010)

Some people don't get house insurance, car insurance, health insurance, death insurance, unemployment insurance, or workers compensation insurance.

Sometimes it works out for them and sometimes it doesn't.

That is the thing about insurance. You never know if you will need it in the future.

Many years ago, I was on the union committee and we negotiated a group death insurance package as part of the contract.

You wouldn't believe the number of people who bitched about that and wanted the money instead.


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## smihaila (Apr 6, 2009)

sags said:


> [...]we negotiated a group death insurance package as part of the contract.
> You wouldn't believe the number of people who bitched about that and wanted the money instead.


Maybe they were right to ***** about it, but for different reasons: Communist decision to have stuff pushed down their throats, part of a union, instead of being allowed to pick and choose themselves whatever services or life insurance. Unless the negotiated package brought the "premiums" down (I so hate this word - premiums to whom? To the insurance mafia, not to their customers  )


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## smihaila (Apr 6, 2009)

Zipper said:


> My thought is I'm sure glad you are not my neighbour.


Let me guess, you purchased Title Insurance as well, didn't you (and without actually knowing what it covers and what it doesn't)? Jeez. Everything has to be "protected" nowadays. We should maybe get "walking and breathing insurance". What if the air suddenly becomes un-breathable?  The point is: everything should be weighted: risks vs. positives, and assessing also whether the insurance costs far outweigh the risks. And if the insurance industry is a mafia / oligopolistic clicque, that's another factor to assess, since they "make the market" and corrupt the Government into agreeing with whatever "premiums" they impose. Like medicine, insurance should not be for profit, but for the common good of humankind (while those ins. companies' employees being paid fairly, no more or less), but I digress again  ...


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## ian (Jun 18, 2016)

I guess that it depends on your financial resources. Can you afford to replace your home, contents, and pay for the demo/clearing of you current home in the event of a fire. Now, or in the future? 

Can you withstand the legal cost and potential settlement cost of litigation from neighbours as a result of a fire or some other occurance on your property that negatively impacts them?


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## sags (May 15, 2010)

smihaila said:


> Maybe they were right to ***** about it, but for different reasons: Communist decision to have stuff pushed down their throats, part of a union, instead of being allowed to pick and choose themselves whatever services or life insurance. Unless the negotiated package brought the "premiums" down (I so hate this word - premiums to whom? To the insurance mafia, not to their customers  )


The "premium" was free to the employee, as part of a comprehensive contract agreement.

The other options to having the workers represented by a union committee are :

a) The company devotes countless hours and manpower to sit down with hundreds or thousands of individuals to negotiate their personal pay and benefits compensation.

b) The company arbitrarily decides what the pay and benefits will be.

Non union companies invariably opt for option b.


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## sags (May 15, 2010)

smihaila said:


> Let me guess, you purchased Title Insurance as well, didn't you (and without actually knowing what it covers and what it doesn't)? Jeez. Everything has to be "protected" nowadays. We should maybe get "walking and breathing insurance". What if the air suddenly becomes un-breathable?  The point is: everything should be weighted: risks vs. positives, and assessing also whether the insurance costs far outweigh the risks. And if the insurance industry is a mafia / oligopolistic clicque, that's another factor to assess, since they "make the market" and corrupt the Government into agreeing with whatever "premiums" they impose. Like medicine, insurance should not be for profit, but for the common good of humankind (while those ins. companies' employees being paid fairly, no more or less), but I digress again  ...


Would you lend your money to someone to buy an asset if they didn't have insurance coverage ?


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## sags (May 15, 2010)

I knew a guy who was a freight broker for a transportation company.

He decided to branch out a little on his own, leased a truck with a reefer and trailer and hired a driver.

He directed a lucrative contract to his sideline business picking up prime steaks in Texas and delivering them to a warehouse in Toronto.

He was earning big money per load and things went well for a couple of trips.

Then he got a call from the US that the truck had broken down and the air cooling didn't work.

He lost the entire load of steak worth a small fortune, and he didn't have load insurance.

It bankrupted him. He abandoned his home in the middle of the night and nobody has seen him since.

Stuff happens. That is why people have insurance.


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## gardner (Feb 13, 2014)

Besides the obvious liability coverage, fire is something to seriously consider. Even if you want to be self-insured on the cost of the building, if there is a fire your exposure may be much more than the basic building value. The municipality will generally order the site to be cleaned up quite promptly and this will generate a bunch of costly clean-up contracts, possibly with hazardous materials requirements and so forth. You could be out of pocket $100K to clean up a building with a value of $90K.

Basic home insurance is cheap enough that I would not attempt to self-insure.


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## OnlyMyOpinion (Sep 1, 2013)

The point *smihaila*, is that you can forego any insurance and you might get lucky. But it only takes one 'accident' and one lawsuit to change your life irrevocably, and quite possibly that of others as well. I certainly hope you have no dependants, family or neighbours whose future well-being are being put at risk by your commie conspiracy opinions.

I'm reminded of the guy who decided to end his life by exiting a window from the 40th floor years ago. Sad, but his choice right. But the fact that a couple of us were leaving the building at that time and that he would have taken us out as well if we had been about 5 seconds sooner, made me realize that you need to consider your impact on others as well, no matter what choice you are making for yourself. 
Sure _you_ save a few bucks a month on insurance. Sure _you_ might be prepared to live on the streets and avoid liability. But what impact could your irresponsibility have on others should that unlikely event/accident occur?

I hate insurance premiums too, and I hate our incessantly rising taxes as well, but I consider them part of the cost of living in a western democracy. If you are aware of a better place to live, please share.


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## Eclectic12 (Oct 20, 2010)

ian said:


> I guess that it depends on your financial resources.
> Can you afford to replace your home, contents, and pay for the demo/clearing of you current home in the event of a fire. Now, or in the future? ...


Where the statement earlier in the thread is that skipping the home insurance "would make a substantial difference to my already tight grocery budget ... I feel like I could absorb the loss from a house fire by selling the lot and buying an even cheaper house, or just renting an apartment. My personal belongings aren't worth very much." - it seems likely the OP won't have the cash to pay for the demo/clearing.

Pardon the pun ... but there might need to be "fire sale" prices for the lot sale. :wink:


Cheers


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## STech (Jun 7, 2016)

crgf1k said:


> Thoughts?



Have you talked to a broker to see if you can find a better rate? Are you to able a generate a bit of income? Take on a tenant? Apply for any government support you might be entitled to and didn't know? Rent a place instead of owning it?


Otherwise, I'll echo what has been said already. Penny wise, and dollar dumb. And I, too are happy you're not my neighbour.

I'm pretty careful with maintenance and accident prevention on my property, but I wouldn't dream of not having insurance. I just replaced my oil fired furnace because the tank was 14 years old, and the chances of it leaking and contaminating the soil was getting higher and higher, even though it looked perfectly fine from the outside. I'm told I could've rolled the dice for at least another 2 years. It cost me $5,500 to switch, but had the oil tank leaked, cleanup costs would've been over a million dollars, and my house would've been worthless. $5,500 is much better than being bankrupt and homeless.


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## OhGreatGuru (May 24, 2009)

OP's post indicates a lack of understanding of what is included in home insurance. It's the liability coverage he should be concerned about. By all means shop around for a better rate. But don't be one of those idiots who suffers a fire/flood/lawsuit and begs for help from charities and social media to bail him out. Or leaves the injured third parties hung out to dry.


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## lonewolf :) (Sep 13, 2016)

Op could Lower monthly cost of home insurance by raising deductible though maybe quote is with high deductible


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## crgf1k (Aug 8, 2015)

The quote was for a "lower level of coverage" policy, and the deductible was $3500, which I think is as high as you can have it. Just like with all the cars I've had, I'd be afraid to make an small or medium sized claims because they just jack up your rates in response. 

I just want to make sure I'm buying it because it truly makes financial sense from a risk/reward point of view, not because I've been exposed to 40 years of insurance commercials. People spend a lot of extra money due to fear. Nobody I know has ever had any of these catastrophic events occur. 

Which scenario is more likely to make me broke when I'm old? 
A) Being exposed to the consequences of a rare catastrophic event occurring on my property, or
B) Withdrawing an ever-increasing amount of money out of my retirement fund every single month for the rest of my life, and giving it 
to the insurance company.


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## yyz (Aug 11, 2013)

STech said:


> It cost me $5,500 to switch, but had the oil tank leaked, cleanup costs would've been over a million dollars, and my house would've been worthless. $5,500 is much better than being bankrupt and homeless.


$1m ? Get real


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## STech (Jun 7, 2016)

yyz said:


> $1m ? Get real


Yup. Seems like a big number until you realize how quickly it runs out.

If you have a spill, here's what I could've been on the hook for.

1) Removal, decommissioning, and cleaning up immediate area will range from 20-30 grand.
2) Ministry of the environment will force an area soil testing. If they find anything, they will ask for the foundation to be dug up. There goes my house. Current replacement cost is estimated at 575 grand by the insurance company.
4) Figure another 50-75 grand to clean up and haul away the house debris, plus foundation. 
5) My tank used to be 15 feet away from my neighbour's water well. Which is shallow and only dug 18 feet down. The tank was also only 20 feet from his foundation. Would his foundation have to be dug up as well? Let's assume no and not factor it in the price.
6) While all of this work is done, and my neighbour's well is being tested and cleaned up, they can't live in the house for 3 months, and they sue me for rental costs, loss of income for both spouses, and other incidental costs. Say 50-75 grand.
7) My family has to be in a hotel or rent a house for a minimum of a year, and our jobs are only slightly impacted, so lets add another 25-35 grand.
8) Undoubtedly there will be lawyer and other legal costs involved, and it won't be peanuts. 

So that's 720 -790 grand. And that's only IF my neighbour's house or water well wasn't affected. How many more 100s of grand would it be to deal with his house? The million dollar limit would have been reached and exceeded very quickly. This isn't different from people thinking that a 1 million dollar car insurance policy is excessive, until you're in an accident and see how quickly things add up. 

Slightly off topic, but I also opted to increase the liability limit to 2M, since it only cost an extra $20/yr. That tells me there hasn't been too many multi million dollar law suits, but for $20 for an extra 1M in coverage, it was an easy sell. Also many, if not the majority, of insurance policies will not pay for an oil leak. They will pay for a sudden accident to the tank, but not a continuous leak. My tank was 910 Liters, and the bottom quarter of the tank was typically covered in snow and a leak could've easily been missed all winter.

My house insurance is now $400 a year cheaper since I got rid of the oil furnace. That was a 40% premium I was paying for the oil tank, which also tells me that leaks do happen and cost a bit of money to cleanup. 

Back on topic. This was my rational in spending the money and not taking the risk. It's the same with having house insurance. The small claims and out of pocket expenses I can handle, but I just don't have a spare million dollars kicking around.


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## STech (Jun 7, 2016)

crgf1k said:


> The quote was for a "lower level of coverage" policy, and the deductible was $3500, which I think is as high as you can have it. Just like with all the cars I've had, I'd be afraid to make an small or medium sized claims because they just jack up your rates in response.


Where do you live? Your rate does seem high for a basic coverage, on an inexpensive house, and such a high deductible. My deductible is only a $1,000, my premium is a little higher than yours, but the house is worth a lot more too. Have you had claims in the past? Or is your area susceptible to flooding or break ins? 



> Nobody I know has ever had any of these catastrophic events occur.


I haven't, nor know anyone, who's ever been in a major accident, or have been pulled over and ticketed by the police for no insurance. BUT, I still will not drive without car insurance.


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## Eclectic12 (Oct 20, 2010)

yyz said:


> $1m ? Get real


YMMV ...


> ... comparatively speaking, Morrison may have gotten off cheaply. He's heard of people paying anywhere from $90,000 to a whopping $400,000 to deal with contaminated soil from oil tanks.


http://www.newwestrecord.ca/news/old-oil-tanks-can-suck-up-your-nest-egg-1.555888


Selling the house isn't a guarantee one is off the hook either.
http://www.timescolonist.com/news/l...st-pay-for-oil-tank-leak-in-saanich-1.1770366




> One unfortunate Nova Scotia *homeowner got a bill for $300,000* to clean up an oil spill from his 15-year-old outdoor tank. *That was just the amount of damage to his neighbours' property.*
> 
> While the insurance company paid that bill and the cost of damage to the house and contents, it did not pay for the cost to clean up the owner's own backyard, remove the contaminated soil and replace it with clean soil.


http://www.aaron.ca/columns/2002-11-30.htm


http://bc.ctvnews.ca/removal-of-backyard-oil-tank-costs-woman-small-fortune-1.621511


Cheers


*PS*

A $300K bill to cleanup the neighbour's property around 2002 or earlier would cost what in 2017, I wonder?


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## Mortgage u/w (Feb 6, 2014)

If you have a mortgage on the property, you have no choice to get insurance. Your lender will force you - unless you have a foolish private lender.

If you own the property free-and-clear, then you can opt out but as many have commented - not suggested.

I understand you don't care much for your belongings and willing to assume potential mishaps, but you should at least get a liability insurance.

If your house catches fire and spreads to your neighbor, you can bet your house that your neighbor or his insurance company will come knocking at your door for compensation. As much as I hate insurance, I think the bare minimum is necessary - for what it costs.


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## Eclectic12 (Oct 20, 2010)

crgf1k said:


> ... Just like with all the cars I've had, I'd be afraid to make an small or medium sized claims because they just jack up your rates in response.


I can understand asking the question ... and have asked the insurance company before putting in the claim. They have been upfront on whether it will or won't affect the future rates.




crgf1k said:


> ... I just want to make sure I'm buying it because it truly makes financial sense from a risk/reward point of view ... Nobody I know has ever had any of these catastrophic events occur ... Which scenario is more likely to make me broke when I'm old?


Trouble is ... you will only know this after the fact. By the time you know you need it, it will be too late.

Despite living in houses with oil tanks for heating fuel for years, neither myself nor my former co-worker had heard of an expensive oil tank leak. It had no bearing on the fact that his neighbour in the duplex had a leak, did not recognise it and ended up with problems on both properties. As his neighbour's insurance company was paying for it, he didn't mention numbers but he had to move out while the house was jacked up to clean underneath.

As I said in post #9 ... how lucky do you feel?


Cheers


*PS*

It's just my opinion ... but based on the numbers, I wonder if it may be more effective to figure out ways to boost your income and/or cut costs by enough to cover both the insurance as well as bumping up what's available for the food budget.


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## Mukhang pera (Feb 26, 2016)

STech said:


> Yup. Seems like a big number until you realize how quickly it runs out.
> 
> If you have a spill, here's what I could've been on the hook for.
> 
> ...


STech,

Are you personally aware of any million-dollar residential property oil tank remediation cases, particularly where demolition of the house on the land was required? You might be right, but it's a bit of a startling proposition.

There have been a handful of lawsuits in BC on the topic. Links to 2 cases are below. The costs in each case were in the order of $200,000. Still, a bigger cheque than many care to write. It's enough to make me grateful that I sold my Vancouver houses with underground oil tanks long before anyone paid any attention to the issue. One such property had a tank in place when I bought it, but it was no longer in use. There was a filler cap sticking up out of the lawn on one side of the house, but just slightly. It could be seen only when the grass was short. Once in awhile I'd forget, and run over it with the lawnmower. I thought of opening it and dipping the tank to see if there was anything in it. Never got around to it, so I have no idea what was the state of the tank, its contents, if any, etc. I lived there for 10 years, happy in my ignorance.

http://www.courts.gov.bc.ca/jdb-txt/SC/12/07/2012BCSC0787cor1.htm


http://www.courts.gov.bc.ca/jdb-txt/SC/10/00/2010BCSC0057.htm


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## Eclectic12 (Oct 20, 2010)

Mukhang pera said:


> ... Are you personally aware of any million-dollar residential property oil tank remediation cases, particularly where demolition of the house on the land was required? You might be right, but it's a bit of a startling proposition.
> 
> There have been a handful of lawsuits in BC on the topic ...


That's limited to where there was a lawsuit, which limits the range.

I am also not sure why one would care about the house being demolished or not where the cleanup costs are almost at the $1 million mark.


From the same 2002 link talking about the Nova Scotia home owner as well as other non-lawsuit cleanups.



> ... Not all insurance policies cover cleanup and replacement costs for the actual earth in, under and around the house.
> Belleville homeowner Bill Hyndman learned this the hard way. When the fuel oil company was filling his basement oil tank, one of the tank supports gave way and the tank tipped over ...
> *The $180,000 Hyndman house is now worth maybe $60,000*, but *the insured cleanup costs are $900,000 and climbing.* Plus, of course, the $300 bill for the original fuel oil.



If from a $180K house around or before 2002 - the cleanup was getting into the $1 million territory, what are costs going to be like fifteen years later?


Cheers


*PS*

The OP says they are stretched by paying $54 / month or $648 a year. If they don't have an oil tank, it won't be an issue but writing a cheque for half that $200K looks like a stretch for them - regardless of what the top end cleanup costs are.


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## Mechanic (Oct 29, 2013)

You should always insure if the financial loss would hurt you. That is to say you spend $140000 and then lose your home you now have nowhere to live also and most insurance covers living expenses. Insurance would cover cleanup of your lot and replacement of your home. liabiity to me is another huge issue, i even have liability coverage on some vacant land. I see articles all the time where someone loses their home in a fire or other disaster and had no insurance. Relying on handouts from other people because they decided insurance wasn't worth it. Who wants to be in that situation.


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## crgf1k (Aug 8, 2015)

Thanks everyone for your responses. There's no oil tank on the property. It's located in a suburb of Windsor Ontario. The houses on either side are worth more than $400,000. They're far enough away that I don't think a fire could spread to them, but they could possibly get heat or smoke damage.

With regard to liability situations, a recurring theme in my internet reading over the past few days is negligence. Sure anyone (or their insurance company) can sue you because they tripped down your steps or heat from your fire damaged their house, but...if an uninsured homeowner showed due diligence and always erred on the side of caution by shoveling and salting the walkways, having trees inspected annually, fire extinguishers, smoke alarms, etc...I think it's unlikely that a court would find them negligent. I found numerous "who pays if" articles that talked about this. If the homeowner was well intentioned and the event was truly an accident, everybody is responsible for their own repairs. That doesn't mean I wouldn't help a neighbor with repairs, cleanup, or possibly pay their deductible though. I know I'd be responsible for paying my own lawyer, but I'm not going to pay insurance to protect myself from a $5000 - 10000 legal bill. As drivers we all accept the risk that we could make an honest mistake driving our cars that hurts or kills someone, and we would be on the hook to pay a lawyer to deal with a careless driving charge.


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## Mukhang pera (Feb 26, 2016)

crgf1k said:


> ...if an uninsured homeowner showed due diligence and always erred on the side of caution..


Here's a case illustrating a lack of due diligence and the consequences:

OCCUPIERS' LIABILITY — Residential premises — Balconies — • LANDLORD & TENANT — Residential tenancies — Liability of landlord • PERSONAL INJURY QUANTUM — Multiple injuries • Loss of future earnings • In-trust awards — Plaintiff, 31, falling from third floor balcony when railing giving way — Court finding defendant landlord was aware of the need for railing repairs and that they had been done improperly by the tenants — Court finding defendant in breach of his duty of care to to take reasonable care in carrying out the responsibility for the repair of premises — Plaintiff heavy equipment operator suffering multiple injuries including a fractured pelvis, fractured ribs, fractured vertebrae, and internal injuries resulting in hernias — Damages of $322,463 including non-pecuniary damages of $100,000, loss of future earnings of $125,000 and in-trust award of $2,500 for plaintiff’s parents.

For the full text:

http://www.courts.gov.bc.ca/jdb-txt/SC/10/17/2010BCSC1773cor1.htm


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## Rusty O'Toole (Feb 1, 2012)

In answer to your original question. Your logic is sound. Insurance companies do charge more, on average, than they pay out in claims. Therefore you can save money by not buying insurance IF you can afford to take the risk yourself. This is why, for example, when I buy a new toaster I always turn down the optional insurance.

Your case is quite a bit different. If you owe money on the house you are obliged to have insurance under the terms of the mortgage. If you own the house free and clear you still need insurance. From what you say your budget is very tight and you do not have a lot of extra money laying around in case of some disaster. Therefore you need the protection.

It might be possible to get cheaper insurance. Be careful you don't go with some fly by night outfit that does not pay off. I don't know how get the best value in house insurance but it seems to me that is the question you should be asking.


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## sags (May 15, 2010)

In these types of discussions, the term "self insurance" is often used.

While I understand it should mean that instead of having $1,000,000 insurance coverage, I have $1,000,000 in cash in case of need.

What I often suspect is that instead of having $1,000,000 in cash, people use the "self insurance" term to mean they don't have any insurance and no money. They are hoping that nothing happens and if it does, they plan on avoiding responsibility if possible (moving back to a foreign country for example)


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## crgf1k (Aug 8, 2015)

The thing is there's a good solid house that I know inside and out, about 15 minutes from here that I could buy for $75,000 cash right now. It's not as nice of an area, but the neighborhood is not dangerous by any means. If I were to lose my current house to some disaster, my contingency plan would be to clean up my lot, sell it and buy something like that...and pay even less property tax than I do right now. I know this doesn't address the liability issue, but I think exercising due diligence as a responsible homeowner does.

I paid cash for my house. I don't have million bucks, but I have substantial savings.


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## crgf1k (Aug 8, 2015)

Mukhang pera said:


> Here's a case illustrating a lack of due diligence and the consequences:
> 
> OCCUPIERS' LIABILITY — Residential premises — Balconies — • LANDLORD & TENANT — Residential tenancies — Liability of landlord • PERSONAL INJURY QUANTUM — Multiple injuries • Loss of future earnings • In-trust awards — Plaintiff, 31, falling from third floor balcony when railing giving way — Court finding defendant landlord was aware of the need for railing repairs and that they had been done improperly by the tenants — Court finding defendant in breach of his duty of care to to take reasonable care in carrying out the responsibility for the repair of premises — Plaintiff heavy equipment operator suffering multiple injuries including a fractured pelvis, fractured ribs, fractured vertebrae, and internal injuries resulting in hernias — Damages of $322,463 including non-pecuniary damages of $100,000, loss of future earnings of $125,000 and in-trust award of $2,500 for plaintiff’s parents.
> 
> ...


I've been a landlord in the past, and I would've sealed that door and had the tenants sign a document acknowledging that the balcony was not to be used.


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## Mukhang pera (Feb 26, 2016)

crgf1k said:


> I've been a landlord in the past, and I would've sealed that door and had the tenants sign a document acknowledging that the balcony was not to be used.


I would probably have spent a few bucks to repair the railing. I would expect having that amenity available could be reflected in the rent. As a prospective (or sitting) tenant, I would not feel a whole lot of confidence in a landlord who would seal off a door to a balcony - thus indicating a lack of maintenance - and who would ask me to sign a "no go" agreement. But that's just me.


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## crgf1k (Aug 8, 2015)

Mukhang pera said:


> I would probably have spent a few bucks to repair the railing. I would expect having that amenity available could be reflected in the rent. As a prospective (or sitting) tenant, I would not feel a whole lot of confidence in a landlord who would seal off a door to a balcony - thus indicating a lack of maintenance - and who would ask me to sign a "no go" agreement. But that's just me.


I meant until the railing was fixed properly


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## STech (Jun 7, 2016)

Mukhang pera said:


> STech,
> 
> Are you personally aware of any million-dollar residential property oil tank remediation cases, particularly where demolition of the house on the land was required? You might be right, but it's a bit of a startling proposition.


No I don't, not for a million dollars. The closest story I can relate is a neighbour 3 houses down. He's a sales rep for local fuel supplier. When I moved into this house, I asked him if his company did oil, and he said not anymore. A few years back, one of their drivers didn't realize a customer's tank was leaking, and it certainly would've been hard for him to tell. He filled it up, and a month later, went back and filled up again, and 2 weeks later the customer called for service because he noticed he was going through oil much quicker than normal, even though it was a cold winter. When the technician showed up, and saw the furnace was right up to spec, he decided to go check on the tank. And that's when everyone's nightmare started. Long story short, home owner's insurance denied the claim, but the home owner was able to sue for some of the costs, and the fuel supplier's insurance was on the hook. The house was dug up, and fuel company's insurance paid out $550,000. Fuel company got out of supplying oil.

When I bought this country property, I came to learn that I wasn't going to get a mortgage approved, until my water sample came back as clean. A bad water well would make the property uninhabitable, and you won't get a mortgage. So even if I didn't contaminate my soil, or my neighbour's soil bad enough for a full excavation, but I contaminated our wells, then our house values would've gone to nearly 0, if the wells were deemed un-treatable. Our houses combined, are well in excess of a million dollars. 


And listen, I totally get it, some are clearly thinking that I'm talking about the worst possible scenarios. And you'd be 100% correct. But this is EXACTLY what insurance is for, and what I was trying to get at. You don't buy insurance for something you can write a cheque for, you buy insurance for the things that'll turn your life upside down. The risk-reward ratio of me keeping the tank, or going with cheaper insurance that didn't cover an oil leak, was astronomically unacceptable. And relating back to the topic, I didn't buy insurance to just cover an oil spill, but you can see how something that you might consider not a big deal, could come back and bite you hard in the ***.

This topic reminds of an article I read a very long time ago. I know psychologists have a proper scientific term for it. If you tell a person they have 1 in a million chance of getting cancer, they'll say great, those are really small odds and it'll never happen to me. If you tell that same person they have a 1 in 28 million chance of winning the lottery, they'll line up every week and buy a lottery ticket, because they feel lucky enough that it'll happen to them.


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## STech (Jun 7, 2016)

Eclectic12 said:


> YMMV ...


From that last link you provided. This is the quote from the homeowner who had the leak in BC.


> "Financially, we've lost well over a million dollars. It's been devastating," Aldred said.
> She says she can no longer afford to live in her current home and is selling it.


Like I said, a million dollars seems like an astronomical sum, until it quickly runs out. I can't imagine the kind of toll that takes on a person's health either.


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## twa2w (Mar 5, 2016)

To the OP. 
You paid cash for the house. You say you have enough savings to pay to clean up after a fire plus enough to buy another house for 75,000.
I presume you are implying you would still have enough savings, income to live on after that.
Something does not compute. The 100,000 grand or so you would spend on clean up and a new house should surely generate enough income to cover 650. Per year inurance cost. Since you seemingly would be able to blow this amount and keep on living. I get that you might get some money for the lot but it could take a long time to sell.


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## crgf1k (Aug 8, 2015)

twa2w said:


> To the OP.
> You paid cash for the house. You say you have enough savings to pay to clean up after a fire plus enough to buy another house for 75,000.
> I presume you are implying you would still have enough savings, income to live on after that.
> Something does not compute. The 100,000 grand or so you would spend on clean up and a new house should surely generate enough income to cover 650. Per year inurance cost. Since you seemingly would be able to blow this amount and keep on living. I get that you might get some money for the lot but it could take a long time to sell.


Yes $100,000 can generate enough income to cover the insurance, but I have property tax, utilities, groceries, etc that I'm budgeting for. $54/month sounds like chump change to a lot of people, but invested in a DRIP it could provide me with $8000 to buy a used Toyota in ten years.

If the house was destroyed and it cost me $20,000 to clean up the site (which I doubt, because I'd do as much of it myself as possible), that lot could easily be sold for $85,000 and I would go and buy a cheap house. My net worth would take a hit of approximately $70,000, but my retirement fund would only take a hit of about $20,000 because I'm willing to move to a lower priced neighborhood. That lost $20,000 would drop my investment income by about $600/year, but property taxes in the cheaper house should be lower as well.

So essentially, I'd be paying $650/year insurance to protect myself from the remote possibility of a $600/year loss of income (excluding the liability issue which I suspect could be mitigated with due diligence).


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## Zipper (Nov 18, 2015)

Quit wasting our time with this nonsense!


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## Just a Guy (Mar 27, 2012)

Why not move to the lower priced house now and cut your living expenses? By selling your more expensive house you'd increase your income drip (assuming you invested the difference) and probably have lower insurance costs, property taxes, etc.


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## Eclectic12 (Oct 20, 2010)

^^^

Or if the neighbourhood is preferred, is renting a room another choice that boost income to cover both insurance and beefing up the groceries?


Cheers


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## twa2w (Mar 5, 2016)

I suspect your clean up costs would be closer to 50,000 to 100,000.
First you have to remove all the burnt remains of the house. It may be classified as hazardous waste requiring special disposal. You will likely need a truck and a backhoe depending on how much remains. 
Then you have to remove the basement and footings and dispose of same. Then you have to back fill the lot.
In the meantime you have to provide security fencing around the perimeter to prevent nosy kids from falling in.
Good luck on that.


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## crgf1k (Aug 8, 2015)

Just a Guy said:


> Why not move to the lower priced house now and cut your living expenses? By selling your more expensive house you'd increase your income drip (assuming you invested the difference) and probably have lower insurance costs, property taxes, etc.


I probably should have bought a cheaper house, but the neighbourhood is really nice and I think it's a good investment in the long term.



Eclectic12 said:


> ^^^Or if the neighbourhood is preferred, is renting a room another choice that boost income to cover both insurance and beefing up the groceries?


No I don't want a tenant.



twa2w said:


> I suspect your clean up costs would be closer to 50,000 to 100,000.
> First you have to remove all the burnt remains of the house. It may be classified as hazardous waste requiring special disposal. You will likely need a truck and a backhoe depending on how much remains.
> Then you have to remove the basement and footings and dispose of same. Then you have to back fill the lot.
> In the meantime you have to provide security fencing around the perimeter to prevent nosy kids from falling in.
> Good luck on that.


If you would've seen some of the renovation projects I've taken on in the past, you'd understand that I'm quite willing to spend a couple of months throwing house bits into a big dumpster. There's no basement, just a cement block foundation and crawl space. Even if I left the foundation there, I don't think it would deter someone who wanted to build a $400,000 house there.


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## zylon (Oct 27, 2010)

*CUMIS Group*

O/P or anyone;

I've been shopping around for homeowners insurance and the best rate I've found so far is with CUMIS Group.

Prolly have to be a Credit Union member to get insurance with them though - I could be wrong.


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## CalgaryPotato (Mar 7, 2015)

You could argue that you should never buy any insurance of any kind, because if the insurance company is making money off of it, then clearly you are making a bad investment. But the fact is, you are tight on money, you aren't in a situation where you should be self insuring.

I think you greatly underestimate things that could happen to your house. Or things that could happen at your house to others. If you were really in the middle of nowhere in a shack, maybe it would be okay, but if you have neighbors in expensive houses, you should really think twice about this.

Also what about the contents of your house? What if something happens to those? Do they have any value? Because right now you are just talking about the physical property, but don't forget insurance covers damage to your belongings as well.

Go ask some people from Fort Mac, if house insurance was worth it for them last year?


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## lonewolf :) (Sep 13, 2016)

yyz said:


> $1m ? Get real


 I believe it I have herd of people having to have their basement dug up over oil tank leaks. Times have changed years ago people that lived on dusty roads would put oil down on roads in front of their houses from the used oil from oil changes from their cars or trucks now almost no one changes their own oil & a few drops leaked now can cost a fortune. It has now to the stupid point oil is used in making so many products such as ashphalt & drips from most cars eventually no big deal yet a few drops leak from someones home oil tank & it has gone crazy


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## crgf1k (Aug 8, 2015)

Thank-you everyone for your input!


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