Does the Government Insure You?
It might surprise you to learn that you could be relying on Uncle Sam for some of your insurance needs.

We’re Americans. If there is one thing that we always — OK, sometimes — agree on, it is that we don’t like the government meddling in our business. Since I wrote and rewrote that sentence half a dozen times, let’s just take at face value that, more likely than not, folks prefer to make decisions for themselves.
We like competition, we like entrepreneurship, we like innovation, we hate taxes. To me, the folks in D.C. always screw things up and end up charging us in taxes for the opportunity. But ours is a country that encourages private industry, encourages capitalism. There is even a division of the federal government whose sole job is to get money into the hands of the average Joe to help him or her get a business started from the ground up. Yes, really; it’s called the Small Business Administration — a government entity that lends money to prevent the government from doing it directly. Perhaps a bit convoluted, but there it is.
So would it surprise you to know that you may be relying on Uncle Sam for your insurance needs? But wait, you have insurance with State Farm, or Farmers, or Travelers, or The Hartford. You surely don’t pay the government for any insurance policies you have. Not you.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
How the government insures you
Let’s start with the low-hanging fruit. If you are one of the 5 million folks out there who has flood insurance, chances are it is with the National Flood Insurance Program via FEMA. It is a policy that gets its moola from the feds, your premium goes to the feds, claims are paid out by the feds. Mic drop. Done.
Sometimes, the feds don’t necessarily insure you as they do with a FEMA flood policy. Instead, they mandate — which is a pretty way of saying “force” — a private insurance company to insure you instead. Whether that company wants to insure you or not, for one reason or another, the government says it must insure this person, and the insurance company complies. The best example of this comes via the Affordable Care Act, or ACA. Oh yeah, and the policy count for this has been growing year over year and is now around 45 million. Yowza!
If I may cheat a bit and give you an example of even the state governments’ involvement in insurance, look no further than the states of California, Florida, Louisiana, New York and Texas. In those states that definitely govern in different ways, 1.7 million policies are active. Starting to see a pattern?
I’ll give you that the ACA is relatively new, only beginning in 2010. But at the rate it is growing, it’s hard to not see the significance of D.C. having a hand in insurance. If you’re wondering about the biggest example, the 800-pound gorilla in the room, then look no further than Medicare. Yes, Medicare. Our good old friend since 1965, now insuring more than 64 million citizens of our great nation. The entire country has 340 million residents, give or take. Do some quick-and-dirty math, and you’ll see the feds cover, through Medicare, about 19% of the entire country!
Private companies can’t handle all the risk
So we have federal insurance policies. We have federally mandated policies. We have state policies, and yes, somewhere in there are private companies. Private industry, the way we like it. But it is impossible to pretend that private industry handles all the risks. And there is a good reason for it. Let’s explore that briefly.
The concept of insurance is based on the probability of a loss occurring. Based on the probability, a premium is calculated. But what happens if the potential for a loss occurring is so high that the premium that would be required is too close to the actual loss exposure? If the potential loss if $1 million, but you see a premium of $200,000, is it really worth paying that premium, or should you roll the dice, knowing in five years you’ve self-insured and could have that money in the bank?
This happens, and rather than not having an insurance policy for consumers, the feds or the states have these workarounds, if you will. They create a policy or force a private insurer to write it. Like it or not, as risks and their complexity change, we may see a time sooner than we think that catastrophic losses, the likes of which would bankrupt a private company, will have the financial backing of the good old US of A.
Related Content
- Are You Committing Insurance Fraud?
- Wait, My Homeowners Insurance Limits What?
- Are You Tempted to Drop Your Homeowners Insurance?
- What You Can Do if Your Insurance Company Cancels You
- What Are You Willing to Do for Cheaper Car Insurance?
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Karl Susman is an insurance agency owner, insurance expert witness in state, federal and criminal courts, and radio talk show host. For more than 30 years, Karl has helped consumers understand the complex world of insurance. He provides actionable advice and distills complex insurance concepts into understandable options. He appears regularly in the media, offering commentary and analysis of insurance industry news, and advises lawmakers on legislation, programs and policies.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
The '8-Year Rule of Social Security' — A Retirement Rule
The '8-Year Rule of Social Security' holds that it's best to be like Ike — Eisenhower, that is. The five-star General knew a thing or two about good timing.
-
Cord Cutting Could Help You Save Over $10,000 in 10 Years
How cutting the cord can save you money and how those savings can grow over time.
-
Should I Buy Stocks or Should I Buy Bonds Right Now?
Generally speaking, stocks provide reasonable growth while bonds provide stable income. Each play important roles in diversified portfolios.
-
You Were Planning to Retire This Year: Should You Go Ahead?
If the economic climate is making you doubt whether you should retire this year, these three questions will help you make up your mind.
-
Are You Owed Money Thanks to the SSFA? You Might Need to Do Something to Get It
The Social Security Fairness Act removed restrictions on benefits for people with government pensions. If you're one of them, don't leave money on the table. Here's how you can be proactive in claiming what you're due.
-
From Wills to Wishes: An Expert Guide to Your Estate Planning Playbook
Consider supplementing your traditional legal documents with this essential road map to guide your loved ones through the emotional and logistical details that will follow your loss.
-
Why Investing Abroad Could Pay Off
Countries overseas are stimulating their economies, and their stocks are compelling bargains.
-
The Top Fourth of July Fireworks and Celebrations Across America
From Boston to San Diego, these iconic celebrations light up the sky — and the spirit of Independence Day.
-
My First $1 Million: Air Force Veteran, 68, Duluth, Ga.
Ever wonder how someone who's made a million dollars or more did it? Kiplinger's My First $1 Million series uncovers the answers.