Charlie Munger revealed his personal insurance choices during the February 2023 Daily Journal Corporation shareholder meeting. He argued that neither corporations nor individuals should purchase coverage for damages they possess the capital to resolve independently. Munger shared this self-insuring approach with his longtime business partner Warren Buffett. Beyond his risk strategy, the Harvard-educated investor consistently championed spending less than one earns to build resilient personal wealth.
Key points
Individuals and businesses should strictly reserve insurance policies for catastrophic fi…: Individuals and businesses should strictly reserve insurance policies for catastrophic financial risks they cannot afford to absorb on their own.
Standard commercial insurance premiums often subsidize systemic waste and fraudulent clai…: Standard commercial insurance premiums often subsidize systemic waste and fraudulent claims submitted by other policyholders.
Long-term financial independence relies heavily on disciplined habits such as delayed gra…: Long-term financial independence relies heavily on disciplined habits such as delayed gratification and spending substantially less than total earnings.
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Speaking at Daily Journal Corporation's annual shareholder meeting in February 2023, just a couple of months before his death, Munger explained if he had enough money to absorb certain losses himself, he would not pay an insurance company to take a risk he could comfortably handle. He was replying to a question on large companies choosing to self-insure against certain risks.
"In my own life, I am a big self-insured and so is Warren," Munger said, referring to himself and Warren Buffett. He said it made little sense for him to carry fire insurance on his house because he could afford to rebuild it if it burned down. "You should insure against things you can't afford to pay for yourself. But if you can afford to take the bumps," an unexpected expense might not be worth paying someone else to cover, the market veteran explained.
Also read | Michael Burry's top 10 life lessons for GenZ: 'Buy half the house you can afford'
"And all intelligent people do that way," he said. "I don't say all, but—maybe I should say,…
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