Insurance Premiums Are Destroying Farms—Here’s What Actually Works (Ep. 340)

I have run into people over the years that self-insure for crop insurance.
It is very, very far and few between, but I have done it.
What do those people do?
They risk it.
They literally risk a few years of no insurance,
taking all their premiums for their old crop insurance,
sticking it in an account,
and hoping to God they don't have losses for X amount of years.
Hello, hello, hello, and welcome back to the podcast.
Thank you very much for being here.
All right, today we are getting into chapter eight,
building your warehouse of wealth,
and we're going to talk about self-insuring.
Now, I have had a few of you ask about this over the years.
People randomly come to me talking about it
because they hear Nelson talk about it.
Well, I'm not going to read a ton of what's in this chapter
because frankly, this is my third try recording this.
Why do you say?
Because I forgot to put my mic on.
Lord have mercy.
Okay, Nelson says,
the reason that people use life insurance companies
is because most folks don't have a pool of money
for reserves for such contingencies.
Now, here's the key to what most people are missing.
It continues,
once a person has lots of cash value and dividend paying whole life
and could sustain a total loss of an automobile
without significantly changing their lifestyle,
then why not self-insure for comp and collision?
So most people will say,
well, I want to insure for comp and collision.
And that's great.
Can you sustain a total loss?
And how is that going to affect your lifestyle?
So a lot of times it's just not possible.
Who's your driver?
Where do you live?
We live on country roads.
So there's constant rock chips in windshields,
or there's deer crossing the road,
or there's a dog crossing the road.
Something happens.
People have animals,
horses running down the road,
cows out,
whatever that might be.
Shortly after we moved out to where we're at now,
my daughter was headed to town and hit a dog.
Because, you know,
most people with two acres think,
oh, now we'll have a pet.
We live in the country.
We don't have to maintain that dog in a fence.
Who cares?
So she hit a dog.
Did major damage to her vehicle.
So you just don't know when that's going to happen.
Now, was it a total loss?
No.
But with the cost of repairs today,
you have sensors.
You have sensors in windshields.
You have sensors in all the mirrors.
You have sensors in all the bumpers.
You have cameras on everything.
It is absolutely crazy.
I have a lot of clients
that are property and casualty agents.
And so I have talked to quite a few of them.
And some of them work with companies like Farm Bureau
or Farmers Union or those kind of places
where they actually have company meetings
and they understand the cost
because the company shares that information.
And it made sense to me
when I was visiting with one of these clients
that he said, you know,
it's not that the insurance company is gouging people.
It is the fact that there are more accidents.
They are more expensive.
And so after visiting with him and hearing
how much more they have in claims
than they used to have in claims,
what they would have in claims in a year,
they have in claims in the first quarter of the year.
And so think about the fact
that these insurance companies
are creating a pool of money, right?
That pool of money has to cover
the increasing costs of automobiles.
It needs to cover more expensive parts for automobiles.
And I don't know about you,
my husband watches car stuff all the time.
And when I watch what's happening with engines,
like we can't make a decent engine.
Nobody, doesn't matter what brand of vehicle you like,
we cannot make an engine that is going to run.
No, that's going to need a new transmission.
No, that's got some kind of engine problem.
Like it's insane.
These are $100,000 vehicles
and the insurance company,
or I suppose warranty is covering those.
But still, what happens if your engine locks up
and you're going down the road 80 miles an hour?
Like there's accidents, right?
It is crazy to me that people truly think
that insurance companies are gouging people.
Then we could self-insure.
Go ahead and self-insure,
but you're going to need
to have enough money in cash value to do that.
And you're going to need to say,
okay, how much was my comp and collision?
So now I can take that amount
and I can put it into a life insurance policy.
You can't drop comp and collision
and then say, oh, I'm going to spend all that money.
No, what you were giving the insurance company
needs to go into a life insurance policy
so you can build cash value
and then you can't borrow it
because you don't know
when the accident's going to happen.
So Nelson had a pool of money there.
So he goes on in this chapter to say
he got in an accident
and he goes, isn't that funny?
When I went to the shop to have my vehicle fixed,
there's a cash price
and there's an insurance price.
Well, isn't there a cash price
and insurance price on just about anything nowadays?
And so it's not just auto
that I'm talking to clients about.
It's also homeowner's insurance.
I have a client that they built their own house.
They have debt on nothing.
They're super, super frugal.
They're super simple people.
Don't live super fancy.
And they're going to self-insure for their home
because their homeowner's insurance went up so high.
She's like, we don't have anything extravagant.
If we have a total loss,
we can live with one of the kids
or we can buy a fifth wheel camper
and then we can figure out
what we're going to do from there.
This is insane.
The amount of money
that we're paying for insurance is insane.
And so there are some people
that are going to be able to self-insure for a home.
Now, if you don't know how to build your home,
you probably shouldn't be self-insuring for your home.
He actually built their home.
So he's able to self-insure for that.
Another one that I see is health insurance.
I am down that whole rabbit hole on TikTok
and all these people,
their premiums are doubling to tripling.
Now that one, I don't understand.
Like auto insurance.
So if somebody out there
in the medical billing industry
could explain to me
why the cost of insurance has gone up so significantly,
that I would like to know.
Because when I talk to my clients
that do health sharing
through like Samaritan Ministries
or something like that,
they're paying half of what it would be
with through insurance.
They're paying half that cost in cash.
Do you have to do some work?
Yep, you sure do.
So you're either going to pay
an insurance company to do it
or you could do it yourself.
It's pretty crazy to me
that we have health insurance
that is doubling in one year.
And don't get me started on government healthcare
because I don't think that that is the answer.
We're going to pay it through taxes.
Nothing is free.
My fear is that we're going to have doctors
that just don't care.
We already have doctors that just don't care.
And so what I'm seeing is all these doctors,
lots of independent doctors
are starting like a monthly subscription program
saying, hey, for 200 bucks a month
or whatever it is,
you can see me for an unlimited amount of time.
And they basically act like they're on call.
They will come to your house if they need to.
They have an office space.
I have talked to a lot of people just recently about it.
They are getting better care.
The doctor is extremely responsive
and is willing to do more tests
because it is a private pay situation.
Then if we were to go through a healthcare system
and then all of a sudden,
nope, we're not going to cover that.
We're not going to cover that.
We're not going to cover that.
I actually follow a gentleman on TikTok
that he works for a hospital
and he calls the insurance company
and then he like does little skits or records.
It's not a live call that he's recording,
but he'll like do a skit afterwards
and talk about the denial.
So he had one guy, double amputee.
They denied the insured a wheelchair.
He said, what do you want them to do?
Army crawl everywhere?
They denied somebody their asthma medication.
That person died.
And he said, I am calling just to let you know
that this individual died.
I want this on record
because you denied him his inhaler.
And I want somebody to have to read this
that you are the reason,
your company is the reason somebody died.
And it's crazy.
Like his calls are so awful
that you just wouldn't think
that that would ever happen.
A life-threatening event is happening.
They're in surgery and insurance is saying,
nope, not going to cover that surgery.
They denied somebody's airplane ride
to the hospital
and they died in air
because of a bad car accident.
They're denying that.
What did you want us to do?
She was so critical.
You wanted us to just take her by ambulance?
Like, and then they said,
oh, she could appeal.
How is she supposed to appeal?
She's dead.
It is the health insurance racket.
That's the one that gets me.
And so what does that look like?
Same as comp and collision.
We need to have enough money for catastrophic
or we insure for catastrophic
and we say, hey,
we're just going to go to one of these private
monthly subscription doctors
and we can get our coverage there.
Or we're going to have X amount.
We're going to have a high deductible
and we're going to have that high deductible
amount in our policy
so that we can go there
and we have our deductible
and then we have insurance for the rest.
It is, it really,
you really have to look at
what you want to self-insure for.
I've had a lot of people talk about
crop insurance over the years.
I've dug into crop insurance.
Insurance companies ask for government
to subsidize that
because they cannot mitigate it.
They have actuaries.
I hope that you all understand that.
Insurance companies have actuaries.
These are extremely smart individuals,
like much smarter than me.
They're mathematician wizards, right?
They're the ones trying to figure out
how much money do we need?
How much do we have to charge
so we have X amount of money
if something catastrophic happens?
And they cannot collect enough premium
to pay for a catastrophic event
if we had massive hail
or some sort of massive weather event.
So that is why the government
is subsidizing that.
And I went down that rabbit hole
to kind of get mad
and be like,
stop having government subsidize
this crop insurance.
And I did some due diligence.
It makes sense
once you do the due diligence
because what I was trying to do,
I was trying to mimic it
and say,
okay, if we had a bunch of people
that would put into one policy
or start a company
and they would all put money
into that company.
And then if there was
a catastrophic event,
they could pay out.
So the only way
that I could figure it to work,
and again,
I'm not that smart.
The only way I could figure it to work
is we need to have people
from all over the country
because we need to mitigate our risk.
And then we need to have people
of all ages.
Because if we had life insurance,
then the oldest one dies
and then that death benefit
goes back into the company
and then that would start
the ability to self-insure.
But in order to get to that point,
you need years of premium collected,
you need lots of bodies,
and you need someone to die.
Kind of a double-edged sword there.
So if you have that equation,
it could possibly work.
But you really need a lot of people
from all over.
And then you got to look at
how many acres are you insuring?
What's the cost of the crop
at that time?
There's just a lot of math,
a lot of mathing
that goes into that.
Definitely foreign actuary.
I have run into people
over the years
that self-insure for crop insurance.
It is very, very far and few between,
but I have done it.
And what do those people do?
They risk it.
They literally risk
a few years
of no insurance,
taking all their premiums
for their old crop insurance,
sticking it in an account,
and hoping to God
they don't have losses
for X amount of years.
Now, I look at people
that I know
that how often
are they getting hit
with weather
having to use
their crop insurance?
And it's often.
I know one guy,
I think it was four times
out of the last five years,
he's had to claim
on his crop insurance.
So think about that.
If the insurance company
didn't have it subsidized,
now who's helping
recover that cost?
Right or wrong,
it's how it works.
You guys can scream
and yell from the rooftops
whatever the heck you like.
I don't frankly care.
I'm not here judging.
I'm just saying,
mathematically,
if an insurance company
was supposed to do that,
how?
And they can't,
which is why
it's subsidized.
Do I care?
No, not really.
Because when we get into
the crop insurance
little thing issue
everybody has
about crop insurance
and that being subsidized.
I did look into this recently
because I was kind of heated
about the crop insurance thing
and everybody's
complaining and moaning
and groaning
and I can't cuss
because there are
little people listening.
And so I started looking
and I'm like,
well, we give child tax credits,
that's a subsidy.
We give homeowners
interest credit,
that's a subsidy.
We're giving the
standard deduction credit,
that's a subsidy.
Everybody's getting a subsidy.
Every single person
is getting
one, two,
maybe three subsidies.
If you're getting
any kind of deduction
because you put
a new oven in
and that was
a energy saver
and there's a deduction
for that,
they're going to give you
some money back.
You're taking a subsidy
from the government.
So I actually looked,
I don't know
what the numbers were.
I don't remember.
I didn't do a podcast
on it because I thought
I'm going to stay
out of this fight.
It's not a fight
I belong in.
And so I looked
and the amount
of crop insurance
subsidy
is extremely minor,
like minor
to what people
are getting
for mortgage
interest deductions
and child tax credits.
Just those two things.
The country
is getting
billions of dollars
there.
and I think
it was like
a few hundreds
millions
for crop insurance.
I don't know.
You guys Google it.
I'm going to stay
out of the fight.
That's as far
as I went
because everybody
seems to be
passionate
on one side
or the other.
Again,
doesn't matter to me.
All right, you guys.
That's all I have
for you
for this chapter.
I know it was
like two pages
and I managed
to get
18 minutes
of conversation
out of that
because there's
a lot of things
that we could
self-insure for.
We just have
to figure out
how to do it
and are we going
to mitigate
the risk
along the way?
Let me know
if you have
comments,
questions,
concerns.
Maryjoe
at withoutthebank.com.
Read
Farming Without the Bank
or Becoming Your Own Bank
or Schedule Your Appointment
so we can look
at what that looks
like for your operation,
your numbers.
You are not going
to get pressured
into buying anything
but you're never
going to know
if we don't
have the conversation.
So you guys
have a fantastic
rest of your day.
Thanks for listening
to the Farming
Without the Bank
podcast.
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has inspired you
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