Insurance

Different stages of our lives require different insurances. I use “require” lightly here, these are always choices, but something to consider depending on your age and assets.

Insurance is used to mitigate risk. If you can handle the risk, either financially or mentally, the choice is always yours.

Health Insurance

There are few choices in health insurance right now. If you are employed, you probably have the best choice – a full-service health plan, one that covers doctor visits, hospitalizations, pharmaceuticals, and more. If you can go this route, you have fewer risks. This is also an option for the self-employed and retired, but it’s an expensive one.

There is also a surge in Christian Health Ministries – CHM’s – these are a co-op that will pay your medical bills under certain circumstances. You have to meet certain criteria to join the co-op, but it provides a level of protection between a full-service plan and being self-insured.

Self-insurance is the riskiest of the options; some would call it uninsured. Self-insurance simply means you are responsible for your own health care needs. That might limit your ability to receive care for specific conditions.

If you are seeking health insurance, I’d recommend an independent broker; they often represent multiple companies.

Auto Insurance

Auto insurance is mandated by the states. While you can assume the risk for the cost of the vehicle itself, you must purchase liability coverage. This insures others on the road. Being caught without liability coverage is not worth the few dollars you’ll save – it could cost you your drivers’ license and everything else you own.

Each state has a minimum insurance amount, but if you hold many other assets, you may want to raise those minimums. There is nothing that prevents someone hurt in an accident from suing you for more than your insurance limits. Other changes you can make to your policy are based on your risk mitigation. If you don’t need towing service, you can eliminate that. If you can afford to replace your car if it’s damaged or stolen, you can eliminate that too. Make your deductible something you can afford, and your premiums will fall in line with what you need. It’s completely acceptable to adjust the recommended coverage to fit your needs.

What about cars that you aren’t driving? Most companies allow you to place a car on hold while it isn’t being driven, there will be a minimum charge for coverage, but it isn’t extensive. I recommend you continue coverage if the car is drivable; this would protect you by providing liability coverage if the car is stolen.

There are so many online brokers, but many communities and companies have independent brokers as well, work with one you are comfortable with.

Homeowner’s Insurance

If you have a mortgage on your property, this will be another required insurance. If you have paid off your mortgage, it’s still a really good idea. Especially with the value of homes these days.

Homeowner’s insurance is tricky, make sure you have the coverage that makes sense to you. You can choose between Replacement Coverage and Market Value coverage. Replacement means whatever it takes to rebuild a home of the same dimensions in the same location. It also generally means you have to rebuild to get paid for the loss. Value coverage means whatever it is worth at the time of the loss is what you get paid, but your policy generally tells you what it is insured for.

With the current run-up of the market and homes jumping $100K in a short time frame, you probably don’t have sufficient coverage at the moment.
If you’ve converted your home to a rental, you will want to convert your Homeowner’s policy as well. Liability and contents coverage change with conversion.

Life Insurance

It seems counterintuitive, but I recommend life insurance only when you have dependents. Once your kids have grown, it’s probably ok to eliminate life insurance. Of course, this is when you are least likely to die, but the consequences of your death are much bigger. Providing adequate support for your spouse and kids is much more important than providing funds that will be handed down to heirs.

The younger you are, the less life insurance costs. There are two types of life insurance, Whole-life and Term. Whole-life is a policy that builds cash value, at today’s interest rates that doesn’t mean much, but it used to be that a whole-life policy purchased and paid for consistently for a few years would take care of itself later through interest earned. Ten or twenty years of premiums would pay for a lifetime of coverage, that’s not quite the case anymore, but it could still be a good investment. Term-life means you have coverage as long as you are paying for it, whether a monthly or annual premium, when you stop paying, it goes away.

Accidental Death and Dismemberment

This coverage provides benefits if you lose a limb or an eye in an accident or are killed in an accident. It’s often offered through credit union membership or as an add-on to another policy. Not a bad investment if you are young and healthy.

AFLAC

Technically this is not insurance. It is aid to help you recover from an accident or illness. The coverage is paid to you, not a provider. It’s often offered through your employer, definitely worth looking at if it’s available. Just know that the policies vary every year, so you never know what they are offering currently; if you have a policy with them that you’ve had for years, it is probably best to hold on to it as converting to a new policy will likely lessen your coverage.

Umbrella Insurance

If your net worth has topped any of the liability coverages you carry, it’s time to consider an umbrella policy. An umbrella policy covers the gap between the standard policy and your net worth. Remember, insurance is risk mitigation. Understand your tolerance for risk.

Other Insurances

There are many other kinds of coverage that might be specific to your needs. I carry boat insurance, event insurance, and commercial insurance that are specific to my lifestyle. I have considered others, like Errors and Omissions, and chosen not to obtain them. I know my risk tolerance well; could it bite me? Of course – I know that too.