Personal Insurance Company?

Aug 9, 2019

  1. Ryan Winters
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    Ryan Winters New Member

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    Hello all,

    I was doing a bit of research on self-insurance laws and saw that in most states, only companies are able to realistically self-insure since most states require a self-insurer to have at least 25 vehicles.

    I've been trying to think of a way to get around this requirement as an individual wanting to self-insure just a few cars. I'm a college student with no background in insurance laws and regulations, so I have no idea if this theoretical idea would ever actually work. But, would it be possible to create my own personal insurance company, register it with the state and take all of the necessary steps to legitimize it, and then sell myself an insurance policy, acting as the sole customer and paying tiny monthly premiums back into my own company? How much would this cost, including all of the necessary certifications/licenses? I assume I would need X thousands of dollars for reserves from the start, but could this potentially be a money saver over the long-term since I could invest my own company's reserves and then close the company later in life, retaining all of the money I had paid into it over the years?

    Obviously I want to know first and foremost if this would even work, but if it would, are there other considerations that I need to take into account? Is this a good idea for someone with the resources to pull it off, or a waste of time and money?

    Any insights would be greatly appreciated!
     
  2. fed up
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    fed up Guru

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    If you were able to self insure, why would you need to charge yourself a premium? Minimum coverage required in Missouri is 25/50/10. so if you could place that amount into a bond against future liability, in your thought process you would have yourself covered. who is going to defend the lawsuit when you get sued for more than your bond holds? How would the state know that you have refilled the pot after you pay a claim? Great idea which may work in the future but for now, insure your vehicles with a major carrier.
     
    fed up, Aug 9, 2019
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  3. insurlegend
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    insurlegend Expert

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    Sounds like a massive waste of time to me
     
  4. fed up
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    fed up Guru

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    the more I think about this idea the more reasons I see problems. Even if you charged yourself premiums, who are you going to hire and how much will you pay to have an adjuster look at a vehicle you damaged, along with your own vehicle or would you leave it up to the body shop estimate? Who would you pick up as your secondary insurance? 5 years ago I would have said that no insurance company will allow driving for UBER or renting your personal vehicle so who knows, maybe you are on to something but I don't see how the insurance commissioner in your state would allow for your idea
     
    fed up, Aug 9, 2019
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  5. Allen Trent
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    Allen Trent Guru

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    Hundreds of thousands, if not millions for you to start an insurance company to get through all the red tape, bureaucracy. Most states require between $500k & $5M in addition as capital reserves.

    buy the Liability & Medical & self insure the physical damage if you want like Comp & Collision, but be prepared to roll the dice & possibly lose out on the odds or make a few bucks by saving more than you have in damages
     
  6. adjusterjack
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    adjusterjack Guru

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    I could tell.

    It won't.

    Your state has a variety of insurance laws. Look them up and read them.
     
  7. tikibarrister
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    tikibarrister Expert

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    Unless, of course, you have a claim. Insurance is there for a reason, no? Insurance companies make money because the risk is spread over millions of customers and they employ professionals to study statistics. You are a risk pool of one.

    Broadside a $100K Porsche SUV and the $50K "policy" you wrote for yourself is going to be mighty inadequate, particularly when the baby in the back seat is paralyzed for life. Also, their lawyer is going to immediately know you don't have money to defend yourself (another benefit of insurance), so even a fender bender will turn into a million-dollar lawsuit.

    The legal costs of setting this up along will dwarf any savings, even if you go through life without a claim.

    BTW if you really have tens or hundreds of thousands of dollars lying around, it's easy to invest it and pay your insurance premiums from the interest on those investments, no?
     
  8. Markthebroker
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    Markthebroker Guru

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    Allen nailed it. Best case scenario, you are going to spend at least $10 or $20 setting this up for every dollar you save on your insurance. You situation just isn't big enough to justify this work. It would be like starting, owning, and operating a ranch so you can have a hamburger. It just won't pay for itself.

    Keep thinking, looking at angles, and working the numbers. I have a feeling you are going to stumble on something very clever the the future. This, however, won't be it. Heck, who knows, you might start and insurance company one day. Warren Buffet seems to really like them.
     
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