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Self-Insurance ... would you?

 
pollinator
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We self-insure ... but then, we are mortgage-free, off-grid & such, and that easily led us to being insurance-free, wrt house insurance. I don't think it's for everybody, but it might be for you, perhaps if your scenario is like ours.

Businesses self-insure (they have money); with the right amount of money, you could self-insure your drivers insurance (not low-hanging fruit for us, but then, we drive used/paid-off vehicles, so actual premium is already low); you could self-insure your house/property (this seemed low-hanging enough for us, especially as nobody in the insurance industry likes our choice of property/house location).

Why self-insure? I can't parse the insurance documents these days ... they all seem to say I'm not covered for this, that, or the other; I'm no longer sure what they *do* cover. Every year is a crap-shoot on whether or not we're still covered for something, or whether or not we'll be kicked off.

If you do get insurance for something, there's still no guarantee they'll pay out; my in-laws lost a house to hurricane Katrina, but their hurricane insurance denied the claim because they said a *tornado* did the damage (the hurricane spawned tornadoes for every house in the area) ... it took years to sort out.

On my health insurance, I'm no longer sure who actually pays for it ... them or us; I seem to be paying more of the actual costs each year. I think this will be our next low-hanging fruit. If you live healthy enough, a bit of catastrophe insurance might cut it for your health insurance.

Insurance-free

We "self-insure" WRT house insurance, and have plans/methods in place for preventing house fires, putting out a fire, *and* for what to do & how to live if the house somehow did burn down; this takes quite a bit of effort, but it doesn't hurt that I'm a volunteer fft, which I recommend for everyone living rural with VFD's.

Again, we couldn't be insurance-free if we weren't also mortgage-free, off-grid, etc. This could be considered gambling, but insurance itself is also a gamble, and I'd rather take the money that would've been paid to insurance companies (*if they would even insure us rural folks*) each year, and apply it to prevention and protection systems and such. At least that money stays on our property, and goes into improving systems.

We've gone about 5 - 10 years w/o insurance now, so consider what you would've paid in (in our area), if you ever wonder about being insurance-free. Note that a tree could fall on our house, or a tornado/earthquake/whatever could come calling. We live in an area that is free of most of the big hazards, and we've mitigated for most else that is possible to mitigate for. Finally, we built small, built inexpensively, and have fallbacks.

Anything else, we just scrape off and rebuild ... only next time, it will be cob, or cordwood, or something different ...

House Fires

Depending on how you read the statistics, the big reasons for house fires are (sources: NFPA, NFIRS database of incidents):
 - cooking
 - electrical (not just house wiring, but power strips, extension cords, etc.)
 - smoking

In our county, for the VFD, it's typically:
 - cooking
 - chimney fires
 - "self-inflicted" fire scenarios

Note that all 3 of the VFD biggies are either preventable at the start, or easily extinguished.
 - Cooking ... put a lid on it; install a range hood suppressor canister (in advance); use the fire extinguisher (carefully).
 - Chimney ... use a chimney fire "extinguisher" (chemfex); use the fire extinguisher (carefully).
 - Self-inflicted ... just don't do it. Don't smoke in bed, then fall asleep; don't put the fireplace coals on the deck to cool down; don't plug that 29th item into the power strip ... this category is somewhat endless, but pretty much 100% preventable.

Electrical ... just don't overload the system or any of its circuits, or abuse it (power strips and such). This does imply learning enough about how a house is wired to understand the relationship between all your powered devices and incoming power thru the distribution system (house panels, circuit breakers, wiring). This also assumes proper build-out of that distribution system in the first place, followed by no abuse in the second place. This doesn't mean you can't DIY, you just have to DIR.

Always call 911 and get the fire department coming. But, realize what your area's response time usually is, and prepare accordingly. In the city (or most *paid* departments), they'll be there almost before you hang up the phone. In the rural VFD areas, it's a tad slower, at anywhere from 15m to 30m or more; most houses are too involved to save at that point. We have fire systems in place (water, pump, hoses) ourselves, and we know how to use them ... all of us in the house. More protection devices are added each year, or existing ones improved in some way ...

Given all of the above, one could reach the point of self-insuring for structure fire, if one pays attention to the types of fire, the causes, and the prevention. Apply lots of common sense and reasonable solutions (for your area).

Types of Insurance

There's all kinds, and some are perhaps suitable for going insurance-free, and some are not. House/property insurance. Health insurance. Car insurance. If you can't avoid it, can you reduce it? All of this could be an "it depends" ...

What are the rest of you doing?
 
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Maybe I have a link at home, but there is a method of health insurance that is direct with local health clinics, no third party insurance, where you pay a fixed monthly amount and they then provide standard checkup/care for nearly free, but I can't think of the name of that type of system right now. It was $50-100 a month from what I recall a year or so back. If that's an option in Montana next year I'll start with that, otherwise probably a high deductible plan and healthy eating (14 of the top 15 causes of death in the US are diet-based).
 
pollinator
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Insurance was designed to cover one for CATASTROPHIC financial loss.  Now the industry has financialized everything.  Think gap insurance.  So yes to you question: "Would you (self insure)?"  I only carry insurance for what is legally required of me; or would be ruinous in my financial life.

I pay cash for vehicles, primarily so I don't have to carry full coverage insurance.  I don't carry flood or fire insurance, as you pointed out, they don't pay out when one actually needs them (or greatly reduced settlements).  I do have a liability policy in case harms comes to another on or by my property, but only after every other risk mitigation is taken.  I certainly won't take a life insurance policy.  I won't even discuss the racket health insurance has become.  

For too long insurance has been viewed as 'replacement cost' for something expensive; or a financial convenience.  It is in the financial benefit of the industry to be that way, so they will write a policy against whatever, for the right price.  But few people take the time to do a risk reward analysis, especially factoring in the likelihood of actually redeeming the policy.  If you are an individual, there is very little in the world that would cause catastrophic financial loss.  If you are a business, find a good attorney and structure your business to insulate you personally from financial harm; and follow the law on required levels of liability relevant to your product.  

One will not be able to get away from insurance completely given the laws on the books, but if you are savvy, much of what is offered today can be avoided.  Like most things for sale, just because it is openly available and marketed, does not mean it makes sense for the individual purchasing.  
 
author & pollinator
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Yep.  I lost my health coverage due to Obamacare - not meaning to be political, but it made insurance for the self employed outrageously expensive, and taking the subsidy violates my morals.  Then, my home insurance was cancelled because I dont' have a furnace... seriously, a house built in the 1940s, continuously insured to that point... dropped.  So, I got back into herbal medicine and I keep some savings for emergencies.
 
pollinator
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There is self-insurance, where you have a retirement fund of 1million dollars and your house is only worth 1/10th if that and you really could replace your house at the drop of a dime.

Then there is self-insurance where if you house burn down you will just live in a yurt while you slowly rebuild a house over 5yrs because you have the time and know how and a bit of money to make it all come together.

Then there is self insurance where you are 80yrs old with no family or much money or health/skill and you just get to the point where you just don't care much and just say the chips will fall where it falls.
 
master gardener
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I have self insured  only to the degree that I am prepared to lose.  I have taken  a middle ground....I go with a very high deductible.
 
master pollinator
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Self-insuring "stuff" you can afford to replace has merit, in the right situation.

But what about liability insurance? This should be considered. Perhaps an unfortunate circumstance could leave you on the hook for everything you have, plus hundreds of thousands you don't have?
 
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Hi,  There are medical groups where people share in paying for each others costs when something happens. You have a monthly premium and a small deductible. The rest is fully paid for. I know of one family who has 1 medication that costs 93K per year, paid for completely. I only know of one company. You can PM me if you would like the name.

In Michigan you are required to have insurance on all motorized vehicles. They are trying to have nonmotorized vehicles to be required as well.

Liability coverage - My understanding is,  someone trespasses on your property, gets hurt, they sue and you pay. Sometimes financially big time, and sometimes big time in jail.

Death insurance, for just burial depends on state and laws, might not be affordable to have to fork over 20k for the cheapest a person can do. Otherwise it may be the one I would recommend for younger families. A 10yr term policy. I have seen too many people destroyed because of a lack of this.

 
S Bengi
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A medication that cost $93,000 will not be given to the sick family at a lost from the pharmaceutical company. Either that family gets a payment plan, and over their lifetime they will have to slowly pay for it. Or the rest of the folks in the group collectively pay extra to pay for it, but it is never magically free.

I can see the family with the $93,000/year bill jumping around saying that they are glad that they have a multi-decade or multi-generational payment plan or even better that they have other sucker members in the collective group paying for their medicine.

I would only be willing to join this collective if I knew that between my kids/myself/parents/grandparent/other family over the long term we would break even and get as much as we put in.

In some way public education is like collective insurance, with a long term payment plan. Public school cost about $15,000/yr per child, so a family with 3 kids, who each spend 12yrs to graduate high school, will have gotten $15,000 x3 x 12 = $540,000. Thats a pretty big grant/loan from the collective/government. At no point do I think that I am overpaying for the education of kids and now subsiding the education of other in the community. The government does not collect that much tax from me. I sure am glad that the billionaires are paying for my kids indoctrination education.

There is also the social cost of nobody having house insurance. How would communities recover after a flood. How much more would bank charge for a risky mortgage, would I find these homeless people in my backyard peeing into my windows, would I have to shot and kill them and deal with the trauma. Would I have to pay for them to spend time in jail?

 
pollinator
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Jack Edmondson wrote:Insurance was designed to cover one for CATASTROPHIC financial loss.  Now the industry has financialized everything.  Think gap insurance.  So yes to you question: "Would you (self insure)?"  I only carry insurance for what is legally required of me; or would be ruinous in my financial life.
 



This.

Here in the UK we get sold insurance for individual domestic appliances, high value items like phones and tablets etc... The cost of insuring to replace one or two items each year would probably less than the cost of the insurance for the whole lot.

Car insurance on the other hand is not really about replacing your vehicle - although that is part of it - it exists for the catastrophe where you, your family, or others get seriously injured and need expensive ongoing care or cover for long periods of lost income. Those amounts are simply beyond the scope of what a normal household could self insure, which is why most nations have legislation in place to make it illegal to drive without a certain amount of cover in place.
 
Jt Lamb
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"Types of insurance" section needs expanding, thanks to all your posts:

Structure Insurance (fire/catastrophe): we're self-insuring, as we're mortgage-free (nobody telling us we have to have insurance).

Property Liability Insurance: we just don't let folks onto the property in a way that increases the risk; we've got the usual gamut of "no trespassing" signs and such; all the property (40 acres) is surrounded by fencing, and we constantly work on cross-fencing (new fences), and improving/repairing the old stuff.
 - We are off the beaten path (might be our best protection). Our like-minded friends don't sue us, and we don't sue them (else we wouldn't be friends).
 - I don't sell chicken eggs, even though some years there's more than we can handle, and we give them away. Every time I look at this, it leads to having some kind of liability insurance, and that leads to the game of "what's really covered, and how can they get out from underneath the coverage in an incident". We may never sell eggs ... doesn't *selling* put us into the category of being a business, requiring business insurance, etc? At that point, the form of the business gets messy ... LLC, etc.
 - I think if someone really wants the property, they'll find a way to sue it out from underneath us. We just pack up the TinyHome and go to the next property, even further out. We'll keep our heads down ... maybe hang hubcaps on the fence, put a dead car up on blocks?

Death Insurance: luckily, we are in a state that permits cremation, so I think burial costs as such are in the single $1000 range. No catastrophe here, although my wife says she's saving $1000, and just throwing me in the nearest dumpster.

Car insurance: low premiums for us (liability only), as we also drive used, fully paid for, beaters; plus, we live rural, which carries a lower premium. IIRC, every time a car gets totalled, the insurance company tells you what you'll get for it, not what it actually costs to get back into a running car, so ... no insurance helping here in my case. We're on our own, and just prep for that scenario.

Health Insurance: I do need the names of some of the catastrophe types of health insurance, but we haven't tackled this next low-hanging fruit yet. Still paying through the nose, through my wife's job, which is why I know this area needs tackling. An older sister had the catastophe insurance, but she's crossed into Medicare territory, which I believe we're required to switch to when we hit a certain age.

Did I miss any others? Not getting asteroid insurance ...

I'm heading out to find a comfy dumpster ...
 
pollinator
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Fire Insurance:  Firstly, do not assume you have a fire department that will "come"...  many folks are literally outside the fire catchment are, there will be no one coming.

If you are that far off the beaten path, there may well be NO fire insurance and you should be looking at large cisterns with personal structure fire fighting ability, and the requisite equipment (pumps, hoses etc.).

Our newly, professionally constructed AND inspected home had an electrical attic fire 2 yrs after it was built, due to negligence of the builder.  One of my criteria when selecting our small acreage was to ensure we were within range of a fire hydrant, and within the volunteer fire departments catchment.  Without that foresight, we would have lost everything; the structure and all it contained.  

Most common cause of electrical fires is rodents...what acreage does not have mice, rats etc. that could be chewing on wires?  

Health Insurance:  I am incredibly blessed to live in Canada where over MUCH protest and grumbling we settled this when universal health care was created in the 1960's.  BUT to think that diet and lifestyle alone will keep you from having "health emergencies" is in my opinion false and unrealistic, especially as due to the increased risk of activities one engages in on remote, rural acreages and as we age.

Vehicle Insurance:  for the most part, to my knowledge, liability insurance is mandatory if using public roads to cover those that could potentially be injured by the actions of your vehicle.  It is why 'shared vehicles' (outside of immediate family members) is a BAD idea as the 'owner' is legally responsible for the action of any driver using said vehicle.  What if there is a crash and you, a passenger or another party outside the vehicle is injured or property is damaged???  You literally could lose your shirt, along with all you have built on your acreage.

When we had our house fire, within five minutes of the adjusters arrival, she tried to tell us we would not be covered as we took in and had foster dogs.  Fortunately I had been proactive and made absolutely certain the insurance broker knew, noted and in writing stated we were covered - or we would have been left with nothing.  I am very 'smug' about this, as my spouse and I had an argument about this, and was told it was ridiculous that I went down and specifically addressed this.  So do not lie, be deceptive or think that in this case "asking forgiveness rather than permission" is the right course to follow - they will ALWAYS do their best to deny a claim, given ANY opportunity.

Everything is a risk/reward benefit ratio.  Everyone must determine where they lie in this ratio; but always keep in mind, that yes, insurance WILL try to stick you for even the slightest inaccuracy or misstatement, these are the folks to be only completely honest with, even OVER SHARE, to be certain you are in compliance.  


 
pollinator
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I dislike insurance on principle, On average the customer loses money, they have to or the companies would never make any money and they certainly do. But we have house insurance and contents insurance (we don't have to we own outright) We also have car insurance, dog insurance (3rd party) and business insurance which are all mandatory.

We have house insurance as the figures work. the house is insured for the rebuild value on the day of the claim. right now to tear down and rebuild this house would cost around 4million Kroner. the barn is only insured with enough to rebuild 1/3 of it which is all we really need it's huge. that comes to 1.5million Kroner. The house and barn insurance, plus 3rd party on the tractor, business insurance, liability for visitors including occasional business helpers, and liability in-case anything I sell hurts someone comes to 11000 DKK a year. just taking the house and barn and not any of the other bits, it would take 500  years to save up enough to rebuild at the rate we are paying insurance.  We didn't take most extras so the water leak we had this year wasn't covered, but I did take the extras for animal damage...
Since there is no way we could replace what we have or even afford to pull down a burnt wreck and make it safe without the insurance we have insurance. However for smaller things like white goods no, nothing is insured, If I buy a $400 fridge I am not insuring it for $50 a year, I will just buy a new one
 
Arthur Angaran
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I can see the family with the $93,000/year bill jumping around saying that they are glad that they have a multi-decade or multi-generational payment plan or even better that they have other sucker members in the collective group paying for their medicine.

I would only be willing to join this collective if I knew that between my kids/myself/parents/grandparent/other family over the long term we would break even and get as much as we put in.  




The wife developed an incurable disease. She is dying and her prognosis is less than 3 years. They were in the collective before her condition reared its ugly head. She is now being pushed in a wheelchair and I doubt they are jumping around.

As for breaking even, it's a gamble. You may need it or you may not. Most people need something in their lifetime. The older you get, most likely the more you need.  But it is a choice everyone has to make for themselves and their family.  And yes, every company makes money. That will need to be added into the equation as well.
 
Jt Lamb
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It seems that most kinds of insurance are "sold", and therefore not a societal requirement or contract. Car (liability) insurance is a requirement, imposed by the states. Health insurance may be required in some states, by virtue of penalties. If you get a mortgage (your choice to do so), then they will require all kinds of insurance, including *mortgage* insurance. I don't know where all these "requirements" are going or what effect they will have on me, other than to do my best not to play in those games.

Catastrophic health insurance will probably be our answer to all the other forms of health insurance, which blows my mind in all the crazy ways it has grown to be our biggest insurance cost. This doesn't mean we'll "hope we never get sick", it just means we'll pay cash for certain health costs (and try to negotiate savings), and have the catastrophe stuff in place for some catastrophe we can't envision. But, hand in hand with that is going rural, and hopefully avoiding all the health risks of the city. When I visit such places, I'm still amazed at the pall of green pollution that hangs over each one, visible from about 10 miles out ...

For now, most insurance is your choice to buy or not buy ... as is your choice to build or buy in certain areas.

Building along a coast that is periodically struck by hurricanes is a problem. Building in flood plains is a problem. Buying homes from shady contractors and land developers who build in these areas is a problem, because one might (dangerously) assume that if the home is built, it is OK to buy. On and on ...

I built in an area with wildland fire risk, and knew that going in, so I mitigated for it in as many ways as is possible, with more being added each year. I built without a mortgage, and avoided many of those issues of every kind of insurance requirement imposed by such a contract. I built small and inexpensively, doing most of the work myself, so was able to use techniques that avoided most of the troubles others might face in shoddy builder/development homes. If I have to replace it (because of that pesky asteroid), I can. We're off-grid, so I avoided most requirements imposed by those players. I still have a responsibility for the land/structures, unlike all those businesses that exploit an area, and then close up shop and leave, by letting the business fail at that point (there are plenty of these examples in CO).

And yes, we have field mice and rats, which is why I trap them in defensive circles way before they get to the homestead structures ... if you aren't aware of the "Jawz" brand of mouse/rat traps, I highly recommend them. They've revolutionized my effort of dealing with such traps ... no more pinched fingers, etc.

I hope that, by showing what we are doing in these areas, there will be examples and ideas for others to look at, if they are contemplating similar approaches to buying land, building on it, and so on. It isn't that our way is right or wrong, it's that it's yet another way of doing it ... and might possibly be of interest or help to others.

It really helps to see what others are doing, or hear their solutions to a set of problems. I have a list as long as my arm of new stuff to try out, including building my next house in a greenhouse ... wow!
 
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depending on laws where you live it can be good idea, or in some cases maybe not.
in talking to insurance agent I learned that where I live if you own property or a house and dont have proper car insurance. if you get in vehicle accident. the other driver can sue you and if they win law suit can end up owning your house and property. when he explained how all this happens more often then you might think possible because of how the state laws are set up it sure did get my attention.
 
Jt Lamb
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One's house or property *might* be taken by lawsuit, or by the government in tax issues. My state requires liability insurance for any vehicle driven, or you are fined/jailed to death; nowhere do they mention that you need this kind of insurance to prevent your house from being sued out from underneath you.

Part of owning a home or piece of property is figuring out just how it can be taken from you in any legal method, and doing what you can to prevent that (types of ownership, like LLC or whatnot, homestead exemptions, keep the taxes paid up), and by talking with lawyers (does one's state have a law that precludes taking your primary home, whereas they would easily grab your 2nd/vacation home).

Perhaps some states don't require liability insurance? Might an insurance agent (if we follow the money) be applying FUD tactics, which is a reasonable sales tactic? I don't think being in a car accident exposes one to home/property loss, I think it's an outcome of any kind of lawsuit, per the legalities of the state one lives in.

Maybe the smart strategy is to get all key property into the hands of an *estate*, and then you just use space on that estate ... makes my head spin to think about it, but it's on our list to consider the whole "estate" scheme, for various reasons.

And don't be at fault if you are in a car accident ...
 
S Bengi
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If your car insurance only covers say $50,000 in health expense and $100,000 in a case of disability. The other party can sue and take your house for the difference.

They could even say that they have mental trauma and can't work anymore and so they need your house. Your car insurance guy is not going to really fight tooth and nail for your house. They will say sure whatever. But if you had house insurance they would fight tooth and nail, not to give the other party a dime for their mental trauma making it hard for them to work and thus they need your house/house insurance money.

Not only that by not having house insurance the other party layers will sees you as an easy target because you will not have a well funded house lawyer ready to defend your house.

But it's a risk and as you said you can have shell corporation based in NV or DC so that your name isn't attached to your house.
 
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Douglas Alpenstock wrote:But what about liability insurance? This should be considered. Perhaps an unfortunate circumstance could leave you on the hook for everything you have, plus hundreds of thousands you don't have?



This is the main reason I would never self-insure:

I know of two cases where people sued and won big time.  Both times the suing party was not on the insured's property.

Both were settled under the Homeowner's policy for the maximum of the Liability coverage.

The solution to both of these, if you want to self-insure, would be not to own animals or vehicles.
 
Douglas Alpenstock
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Yes, that's the worst-case scenario. Life happens. Both our home and auto policies have $2 million in liability.

I wonder if it's possible to have personal liability insurance without a property policy? I can't see why not.
 
Jt Lamb
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To expand on the car scenario, and how that might affect your home ... you cause crash, lawsuit ensues, suing party wins a "judgement" against you; this would be the start of their journey to try and get money. They will obviously take all that your car insurance would provide, up to some dollar amount; assuming things weren't settled out of court for the exact dollar amount that your car insurance would offer.

With the judgement in hand, they would try to file lien(s) against anything of value. For most folks, this is your home, your salary, etc. In Colorado, we have a "homestead exemption", which my puny understanding of the law seems to indicate that our "homestead" (house & 40 acres) would be protected from such judgement (up to the amount colorado exempts) ... as I built this home myself, it and the land value fits under the exemption amount.

This should protect us until the land can be put into some form of estate, which is a long legal road that we are on ...

But, in theory, then, I should not be subject to home being taken for a car crash. As our land is fenced, and no animals should be running loose, we should have reduced risk there as well.

Also, we've lived on our property for the requisite 10 years, so once I reach a certain age, property taxes should also fall off, or be reduced by a certain exemption amount.

I think the biggest protection is perhaps not having lots of money, either in the form of lots of value in property, or lots of insurance coverage. In both cases, most lawyers won't handle a case where the money can't be seen or easily gotten at ... if you believe in such affects on lawsuits.

If you end up with lots of value, then everyone else makes more money while you try to figure out how to protect it ... lawyers, insurance, etc.
 
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anyone know if there are ratings available on the ecological/environmental record of homeowners insurance companies/underwriters?  for New England?  
 
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