I feel like standing on a bit of a soap box today (and I’m even continuing it next Saturday!!!) – why? I will be “yelled at” by overzealous insurance agents. I will be told I am wrong by people who have had their 1-in-a-million situation cost them their life savings. I will be dismissed because I am not a licensed insurance broker. My real reason: I want to bring a good dose of reality to a discussion so filled with hype, emotion and confusion so those of you who are trying to figure this mess out will have a place to start. I also want to have this discussion so others can chime in. Since there are literally volumes that could be written about each of the various insurance types, I will simply list out several of the more common ones and give you my BASIC take on each’s validity and utility. You’re welcome to agree or disagree based on what’s going on in your life. If you have something to add to the conversation (not just rhetoric), comments are open and welcome. Help us to all learn something!
Before I get started, let me make mention that I brought up this subject early last year discussing Faith-Based Health Sharing Plans. It may be of help to look at that post for some additional info. Also, as you go through the list today, I’m sure some are missing from what you want to know about. Next Saturday, I’ll discuss more insurance types (list at the bottom of the post).
You’re going to die one day. If someone, other than you, today depends on your income to make ends meet, you need life insurance. Otherwise, when you’re gone, they go hungry. What kind of life insurance? Term – level term, to be exact. Why? It’s cheaper than any other life insurance type, it’s stable, and your goal is protection, not investment. You’re trying to make sure your family is cared for. How much should you get? About ten times your annual salary. How long of a term should you get? Long enough that when the term is up you’re either ready to swallow whatever the premiums will be for a renewal or prepared to be self-insured by having a big nest egg for your family to live off of if you don’t wake up one morning.
At a bare minimum, you need major medical insurance coverage. The number 1 cause of bankruptcy in America is medical bills. While even in my family there is an awesome story of God’s providence in taking care of huge medical bills, that is not the norm. You NEED health insurance. Otherwise, your health will suffer due to lack of basic preventive care, you may hesitate to be tested for potentially major medical issues and you may receive sub-standard care if you have a medical emergency. You NEED health insurance. It is expensive, can be a pain to deal with, and very political. But I repeat – you NEED health insurance.
In most states (maybe all of them now), basic liability auto insurance is required by law. If you plan on owning a car, insure it. Unless it is a really old car and you have the money to go buy another if you crash it, get full coverage (covers whatever you hit + your car’s repairs) – don’t just settle for liability (covers whatever you hit but not your car’s repairs). The cost difference is usually not that much. There are lots of little add-ons available for car insurance like towing, trip discounts, rental reimbursement, etc. Pick and choose these carefully, knowing that each has a cost. I’m a minimalist when it comes to most of these things. One last thought here – shop around for a GOOD company, not just a cheap one. Cheap auto insurance may cost less, but if you have a claim you may have a nightmare experience and even get dropped from coverage.
Specialty Disease Insurance
You can get insurance for cancer, heart attacks, hospital ICU stays, and just about everything else you might imagine. With almost no exceptions, I think these are all gimmicks. I say that even knowing personally that some of these insurances have benefitted family members who had them and came down with the covered disease. With these, you must weigh whether you NEED the extra income vs. just saving/investing what you would spend on premiums and using it later whether or not the negative life event occurs. The common thing I want you to remember with all these insurance types is that, as long as you have medical insurance, these incidences are generally covered in some manner. If you get cancer and have health insurance, are you covered? Yes. If you have a heart attack and have health insurance, are you covered? Yes. Before buying one of these policies, ask that question and make sure of the answer.
Next week, I’ll tackle at least four new insurance types:
- Homeowner’s/Renter’s Insurance
- Disability Insurance
- Long-Term Care Insurance
- Pet Insurance
If other questions come out of the comments from this post, I may address those as well. As I said at the beginning, you’re welcome to agree or disagree with my assessments based on what’s going on in your life. If you have something to add to the conversation (not just rhetoric), comments are open and welcome. Help us to all learn something!