This is My Insurance Blog

This is My Insurance Blog

Is there a title that makes you want to read a blog less than this one?  I know, and despite the fanfare, I’m going to suck it up and write one blog here talking about the importance of insurance in your financial plan.  But wait, there’s more. I’m also going to touch on my thoughts on the different types of insurance out there.

We get so caught up on living our lives, saving for the future, and of course spending for the now that often the thought of what if doesn’t come to mind.  What if my house burns down, what if I don’t wake up tomorrow, what if I get a terrible disability?  These types of thoughts aren’t natural, and mankind’s life would be grim if they were.  That said, a well-crafted financial plan, or any plan for that matter, must start with protecting the foundation.  The best and most efficient way, in most cases, to do that is through insurance protection.

Now, I hate insurance as much as the next guy, but let me tell you that said, I may be the most insured human you know.  I am a firm believer in shoring up that foundation before I can begin wealth creation.  Below, I will give you my quick, and I mean quick, take on the key insurances in most adults’ lives.

Medical Insurance

Necessary evil.  You simply can’t go through life at any age without health insurance coverage.  Even if you were independently wealthy, the subsidized rates insurance companies negotiate for procedures and check-ups are substantially cheaper than paying rack rate.  It is critical that if you were to lose your job, you maintain a hefty and robust health insurance plan.  I personally gravitate to a high deductible plan, as I love the H.S.A vehicle, but health insurance is one that should be analyzed based on your needs and what coverage best suits your family.

Life Insurance

Married?  Kids?  People who are dependent on your income or the job you provide for the family?  The costs to those dependent on you would be unruly if you cease to exist?  Well, guess what?  You need life insurance, and it isn’t even a debate (unless you are incredibly independently wealthy).  In most cases, buy term insurance and invest the rest, as they say.  I’m not a huge proponent, in most cases, for big, expensive permanent insurance.  Regardless of whether you agree with me or not, the most important thing when it comes to life insurance is having the appropriate amount of coverage to cover all your needs during your most exposed years.  Term insurance does a great and inexpensive job of covering this gap for most people.

Disability Insurance

You are substantially more likely to get disabled during your working years than to die prematurely.  This is where giving disability insurance a hard look generally makes sense.  If your employer offers a plan, elect the maximum they offer.  Typically speaking, work disability plans aren’t the “best,” but they’ll come at a fraction of the cost of purchasing a policy independently.  That said, it is worth reviewing what is offered through your employer, if anything, and then figuring out how much of this type of exposure you care to cover.  A few quick notes on DI insurance.  If you pay through your employer with pre-tax dollars, and no imputed income is calculated through your employer, then your benefit will be taxable if you need it.  Also, if going the individual route, a good way to save some money on the premiums is by having a longer elimination period.  I personally am more concerned about a permanent disability than one that keeps you out of work for 6 months.

Long-Term Care Insurance

This is where insurance gets really fun!  Long-term care insurance basically covers in-home care, assisted living, and nursing coverage.  This is generally a gap in most people’s insurance coverage.  There is a high likelihood that you or your spouse will need this type of care at some point in your life.  I do recommend understanding the ins and outs of this type of coverage so you can self-determine if it is an exposure you want to outsource.  The other option is insourcing or really self-insuring this risk.  These types of policies either generally come in a cash pool that will pay for some portion of care, or a life insurance policy with a long-term care feature with a pool of money that can be used for death or LTC.  I find this insurance is very personal and contingent on finances, risk, and what you’ve experienced with your own parents’ care needs.  In most cases, in your 50s is where you should address these needs.

Property & Casualty Insurance

P&C insurance (or, in other words, homeowners and car insurance) is another necessary evil.  These are exposures that cover your home, personal property, and automobiles.  I typically like making sure you are properly insured here and not overly or underinsured.  Also, personally speaking, I’ve got larger deductibles as I’m prepared to self-cover a decent amount of exposure.  I’d rather use these insurances to cover catastrophic types of losses rather than any small thing that goes wrong.  Remember, once a claim is put through, your raters are likely to increase.  More than any other type of insurance, I recommend reviewing these policies and coverages on an annual basis with your insurance rep.  Last thing to say on this topic is that in many cases, I highly recommend an umbrella policy in addition to protect against a large lawsuit that is above and beyond your traditional coverage limits.

Insure, Assure, Ensure, Unsure

Here is my quick hit guide on the insurance most of us should be giving a look at, and personal thoughts.  Again, not a fun topic, but one you will be thankful you audited if a tragedy should strike in your life.

As always, stay wealthy, healthy, and happy!