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 8, 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 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 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 for an 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 an 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. maryjo@withoutthebank.com. Read Farming Without the Bank or Becoming Your Own Banker, 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. We hope today's episode has inspired you to take control of your finances in new ways. Don't forget to check out our website, farmingwithoutthebank.com, and engage with us on our Facebook page, Farming Without the Bank. Join us next week as we smash more financial myths and empower you to accomplish your financial goals.