So it’s an almost successful plan — if I save all my premiums, get an unusually high rate of return and no one in my family has a single medical bill for 20 years. And then I get in a car accident.
I wouldn’t call 6% an unusually high rate of return. I ran the numbers for 6% accrued monthly on $1,500 per month — got $693,061.30 for year 20. The growth due to ROI became greater than the monthly contrib at year 12 and 8 months.
For laughs and giggles, I put in 10.8% which is around the historical S&P500 return (continuous 1950 to 2008). This gave me $1,264,626.66 with flat $1,500/month. The ROI exceeds the monthly contrib at year 7 and 6 months.
By the way, the historical return through Berkshire Hathaway is higher than 10%…
BTW, auto insurance is supposed to cover medical, and you are not likely to see $700k on an auto accident. I know someone who went through a windshield and had the face literally pealed back.. it cost less than $700k (they were also not wearing seat belts and no airbag).
Someone is missing the whole meaning of the word “insurance.”
Never missed the meaning. I have always felt that insurance should only be used to reduce risk, not to try to reduce actual health costs. Insurance does well to reduce risk, but it makes the regular costs more expensive. As the saved amount increases, just reduce insurance covering catastrophic events.
