ce is fundamentally a bet where you pay a premium (with the insurer building in profit and overhead) to transfer risk. For the ultra-wealthy, the math often flips: if you can easily cover the worst-case cost without disrupting your lifestyle, investments, or liquidity, paying premiums becomes an unnecessary drag.
Charlie Munger (Berkshire Hathaway vice chairman, worth billions) famously exemplified this. He said he stopped carrying collision insurance on cars and fire insurance on houses once he got rich, because “I could easily rebuild a house if it burned down” and didn’t want the hassle of claims. He viewed it philosophically: insure only what you can’t afford to pay for yourself. Warren Buffett has expressed similar views, and both were big players in the insurance industry while personally self-insuring many personal risks.
The logic is straightforward:
• Expected value: Insurance premiums exceed average payouts (insurer’s margin). Self-insuring lets you keep that “house money” invested and compounding.
• Liquidity vs. catastrophe: For smaller or manageable risks, the super-rich prioritize keeping capital at work in businesses, stocks, or other assets rather than tying it up in premiums.
• Diminishing marginal utility: Losing $1 million stings far less when your net worth is $500 million+ than when it’s $5 million.
