Self-Insure Breakeven Calculator
Example: Annual premium for the coverage: 1200 $ · Coverage (max payout): 20000 $ · Your current liquid assets: 80000 $ · Expected investment return: 6 %/yr · Probability of a covered loss per year: 2 % · Years to model: 10
| Net gain from self-insuring | $12,766 |
| Premium banking value after period | $16,766 |
| Expected annual loss cost | $400 |
| Asset base needed to self-insure comfortably | $200,000 |
| Self-insure verdict (1=yes, 0=keep coverage) | 0 |
Worked example
A $1,200/year auto collision policy on a car worth $20,000 with a 2% annual loss probability costs $1,200 vs an expected payout of $400. Banking $1,200/year at 6% for 10 years grows to $15,817. Expected losses over 10 years: $4,000. Net self-insure gain: $11,817. If your liquid assets exceed $200,000 (10× the coverage), absorbing a total loss without hardship is the rational choice.
Frequently asked questions
What types of insurance are most suitable for self-insuring?
Lower-value, higher-frequency coverages are the best candidates: collision on an older vehicle, extended warranties, travel insurance, renters insurance if your possessions are modest. Never self-insure catastrophic, low-probability risks you could not absorb — liability, disability, health, or life insurance for dependents.
What asset level is the rule-of-thumb threshold?
Most fee-only financial planners use a coverage amount of 10× the maximum claim as the self-insure threshold — meaning a single loss would not force you to liquidate more than 10% of assets. This tool calculates that threshold and compares it to your current asset base.
Does dropping coverage affect my credit or mortgage?
Lenders require homeowners insurance and collision coverage on financed vehicles as long as the loan is outstanding. You cannot self-insure these until the lien is released, regardless of your asset level.
How do insurers price low-probability events?
Insurers price at expected loss plus administrative overhead plus profit, meaning premiums are always above expected value for the policyholder. This built-in margin is what makes self-insuring profitable once your assets can absorb the risk.