Life is a spectrum of possible events, positive and negative, each with its own probability and consequence. The job is to maneuver through them and achieve the best quality of life using all the tools available. Insurance is one of the tools, and like others it can be used correctly or incorrectly.
Despite my best efforts in planning life and managing risk in ways that are most productive, and maximizing the value of my expenditures, I still manage to spend about $5000 per year on insuring possessions. My total lifetime return on every policy I’ve ever bought (combined) is about $500, a single claim, and after I made that claim I received a letter saying it was paid in error. I don’t think of insurance companies as my friends or allies, I think of them as a tool…. the risk management tool of last resort 
Silvaire wrote:
I think of them as a tool…. the risk management tool of last resort
The point is that 3rd party liability insurance is not your tool, because it is not primarily about you. It is about the people who get hurt (physically or economically) if you have an accident.
A side effect may be that lawyers siphon off part of any damages but to use that as an argument against is rather cynical. Anyway, that’s easy to fix by outlawing “contingent fees” as most of Europe do.
Airborne_Again wrote:
The point is that 3rd party liability insurance is not your tool, because it is not primarily about you. It is about the people who get hurt (physically or economically) if you have an accident.
Actually it is my tool, the insurance companies could confirm that I buy it with my hard earned money, and own it. But you are correct about why I do spend $5000 yearly on insurance to cover my potential liabilities. That costs about $7000 out my gross income or roughly $600/month for insurance and the associated income tax. Many other risks are managed more effectively in other ways, for example the accumulation of salable assets and capital – which buying too much insurance counteracts. $600 monthly was about the monthly negative cash flow on my rental properties, now all paid off after 30 years… during which time I made no (successful) insurance claims whatsoever.
If I ever die in an accident my wife is going to have a very nice life for the next few decades, and not much of her income will come from insurance (other people’s money minus the over 50% cut taken by the insurance company), it will instead come primarily from my risk management approach and what I personally earned, didn’t waste, accumulated and left for her 
Silvaire wrote:
If I ever die in an accident my wife is going to have a very nice life for the next few decades, and not much of her income will come from insurance (other people’s money minus the over 50% cut taken by the insurance company), it will instead come primarily from my risk management approach and what I personally earned, didn’t waste, accumulated and left for her
Unless you die in an accident while crashing on expensive properties and killing people. In that case (and no liability insurance) she will be left with nothing.
Hence (and for the third time) my choosing to spend $5K per year on insurance, primarily to cover the potential liabilities that I currently carry. A fraction of that is for the plane, as I mentioned. While there are places and planes I would fly without liability insurance, my current situation is not that. A lot of people and their lawyers are in my area, even if the chances of encountering them unintentionally aren’t great. As you guessed, I’m not wealthy enough to self insure for the liability I perceive in my flying circumstance.
My wife’s future income after a fiery crash would not however be strongly related to insurance because (1) in the past I limited my liabilities by not marrying until I could properly afford to do so and (2) In addition to maximizing income continuity and minimizing living expenses, during that period I chose to invest my money versus buying e.g. life insurance or much vehicle hull insurance – which would have been a relatively inefficient use of the resulting money stream. Insurance companies know that, they buy the same stuff with harvested premiums that I bought and they make a lot of money in doing so. They aren’t a charity and they have no feelings or generosity. The insurance business is about money, they produce nothing tangible, and most of that money stays with the insurance company.
The reason BTW that aircraft liability insurance is relatively cheap (mine is $600 per year) is that the real world chance of a high consequence event like “crashing on expensive properties and killing people” is just slightly over zero. In my local area, where literally thousands of light planes fly directly over urban and otherwise populated areas every day, it happens only once every few years. But it’s often enough to justify $600 of my money yearly.
Third party insurance is, in my eyes, “alternativlos”, as Mrs Merkel names it (without alternative). And in Europe it’s mandatory.
But hull insurance is another thing. I do have it, and was planning to pay for the first years. But it’s a personal choice. I don’t like insurances, and am happy about every one I don’t have ;-)
UdoR wrote:
Third party insurance is, in my eyes, “alternativlos”, as Mrs Merkel names it (without alternative). And in Europe it’s mandatory.
In some US states, where car insurance is similarly ‘mandatory’, we actually still have the option to post a bond versus being forced to do business with a commercial company, or (worse yet) buy from a government run vehicle insurance monopoly as in e.g. Canada where car insurance costs are horrific as a result.
I’m sure it’s ‘better’ from Ms Merkel’s and her ilk’s point of view that both resources and responsibilities are not personal, but institutional. I don’t share that opinion, my responsibilities are mine and I prefer to choose when I want to cooperate with others in sharing risk. The option to do so is not a free service, overall it’s less than 50% cost efficient in practice.
UdoR wrote:
I don’t like insurances, and am happy about every one I don’t have ;-)
Yep, me too. I am reminded of this when traveling with friends in the insurance business. Four months on the other side of the world at $350 a day, while still paying the bills at home? No problem, lots of school teachers are buying life insurance (that market is targeted by their franchise).
In Europe some larger airfields have a stipulation that you must carry something like €5 million in liability insurance before you can land there. Does this not happen in the USA?
PS I don’t know where I got above information I’m searching around to find a source.
It may happen in US when you are using an some FAA hangars you will need third party to rent it, even if the state does not mandate third party for aircraft to land on the runway
