Charlie Munger Said He And Warren Buffett Skip Insurance And All Rich Should Too – 'I Can So Easily Rebuild A House That Would Burn Down'

As Los Angeles grapples with devastating wildfires, the numbers are staggering: at least 11 lives lost, over 150,000 displaced and damage estimates ranging from $135 billion to $150 billion, according to The Guardian. 

The Palisades fire has already cemented its place as one of the most destructive in the city's history, leaving behind a trail of destruction that includes homes, businesses and schools. While insurance companies brace for a wave of claims, it's worth revisiting the late Charlie Munger's bold stance on self-insurance – a philosophy rooted in practicality, not risk.

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Munger's Take on Self-Insurance

During a November 2023 Daily Journal shareholder meeting, just weeks before his passing, Munger shared his thoughts on why the wealthy should skip traditional insurance altogether. Speaking with CNBC's Becky Quick, he explained, "I'm a big self-insurer and so is Warren." 

He quipped, "It's ridiculous to carry fire insurance on my houses because I can so easily rebuild a house that would burn down. So why would I want to bother fooling around with the claims process?" 

For Munger, insurance made sense only for risks you couldn't afford to cover yourself. "You should insure against things you can't afford to pay for yourself. But if you can afford to take the bumps, why would you want to fool around with some insurance company if your house burned down? I would just write a check and rebuild it," he added, emphasizing the inefficiencies, waste and fraud that can come with traditional coverage.

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Munger explained, "Once I got rich, I stopped carrying fire insurance on houses. I just self-insured. And that's the right way to do it." When interviewer Quick pointed out that this perspective was surprising given Berkshire Hathaway's vast portfolio of insurance companies, Munger didn't hesitate. "I'd rather tell it the way it is than tell it in a way that helps Berkshire," he replied, staying true to his trademark candor.

The Wildfires Price Tag

Of course, not everyone has the financial cushion to simply "write a check" when disaster strikes. The wildfires sweeping through LA illustrate the scale of destruction that even the wealthiest would find challenging to absorb. Entire neighborhoods have been leveled, with thousands of families depending on insurance payouts to rebuild their lives.

Yet Munger's advice highlights a key takeaway for high-net-worth individuals and corporations: the importance of evaluating what risks are worth insuring and which ones you can absorb. For Meta, Tesla and other massive companies, self-insurance has become a trend, allowing them to bypass traditional insurers and directly manage their own risks.

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Is Self-Insurance for Everyone?

Munger's philosophy isn't about ignoring risk but understanding your capacity to handle it. For most people, insurance remains a lifeline in times of crisis. The idea of facing a $1 million rebuild without coverage is unthinkable for the average family.

But for those who can afford it, self-insurance eliminates middlemen, reduces costs and provides flexibility. Munger believed it also removes the burden of subsidizing fraud, inefficiencies and the overhead costs baked into traditional insurance premiums. "There's a lot of waste you're paying when you buy insurance for the other fellow's frauds," he noted in an October 2023 podcast appearance. 

Lessons From the Fires

While the current wildfires are a grim reminder of nature's destructive power, they also underscore the value of preparedness. For most Angelenos, insurance is nonnegotiable, a safeguard against disasters that are becoming too common. But Munger's perspective offers food for thought, particularly for the wealthy: if you can handle major risks directly, why pay for someone else's inefficiencies?

As the fires continue to burn, recovery will depend on a mix of public and private efforts – insured or otherwise. While Munger's approach may not be a fit for everyone, his emphasis on cutting through inefficiencies and focusing on what truly matters remains timeless advice, even in the face of disaster.

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