Protecting Yourself Financially: Types of Insurance a Man Needs

by A Manly Guest Contributor on December 22, 2011 · 44 comments

in Money & Career

Editor’s Note: This is a guest post from Jeff Rose. 

The day we were issued our IBA’s (Interceptor Body Armor or Flak Jacket), I could feel my knees and lower back aching already.   Having to lug around an extra 16 pounds everywhere we went, on top of all the other gear we were issued, was more than cumbersome–it sucked.

But the nature of the situation demanded it–we were at war. The Kevlar in our IBA and helmets, our up-armored humvees, and our weapons were there for one reason–protection.  Or stated another way: insurance.

For the entire year I was in Iraq, I hated wearing that stupid battle vest.  It was heavy; it was hot; it was just flat out annoying.  Despite my negative feelings towards it, I couldn’t deny that it saved lives.   As they say in the military, it was a “necessary evil.”

That same concept can be applied to insurance.

Raise your hand if you enjoy getting an insurance premium bill in the mail?  Didn’t think so.

There are some forms of insurance you just can’t live without. Car insurance is mandatory in all states, homeowners insurance is required if you carry a mortgage, and any parent will tell you that medical insurance is crucial.

Face it, insurance is a “necessary evil.”

With rising costs hitting all of these necessary protections, it pays to make the most of every dollar.

Here’s a look at the types of insurance every man should own.

Car Insurance

Since you have absolutely no choice about carrying car insurance, you might as well shop around to find the best deal. I know that there are many advertisements trying to entice you to change companies, but before you do that, compare what you are getting right now to what they are offering. Companies frequently “save” you money by providing lesser coverage; in my book that is no savings. Shop around and do it early, insurance companies will almost always match any legitimate offers you find.

The quickest and easiest way to drop those premiums is to raise your deductible. By increasing your deductible from $200 to $500, you can save 30% on your insurance premiums. Make sure to set aside the money needed if you do have an accident and need to produce the higher deductible.

Ask about discounts. Teen drivers usually get a discount for good grades or certain types of driver’s education programs. If you don’t drive much, or your job is just a couple of miles from home, you may be eligible to get a low-mileage deduction.

Also, consult your insurance agent when purchasing a new vehicle so you know in advance which cars cost less to insure. Some companies offer lower deductibles for each year you go without having a claim, so make sure you ask questions because it could save you money in the long term.

Homeowners Insurance

Just like auto insurance, increasing your deductible on homeowners insurance will decrease your premiums. Many companies will offer discounts to customers who purchase multiple policies with them, so bundle your car and homeowners insurance to save some money.

Only insure your home, not the land for replacement costs in case of disaster. This common mistake costs many people money. You won’t have to replace the land, just the building, so check your policy to make sure you are insuring only what you need.

Another thing to consider is staying with a company for the long haul since they may offer loyalty discounts. Improving your home’s security and disaster resistance will generally garner you some deductions as well.

Other Mistakes to Avoid

Not Buying Enough Homeowners Insurance: Many homes today are underinsured. There are many reasons for this; nonetheless, you do not want to be in this position in case a disaster strikes.  Our area was hit with an “inland hurricane” that caused millions of dollars of damage to our community.  I have heard of many horror stories where homeowners did not have the proper coverage and were left with paying all the bills on their own to get their home fixed.

Not Upgrading the Policy When Changes Are Made: One reason that homes are underinsured is because there is no attempt to upgrade the policy. Any time you make any major additions to your home, it’s a good time to review your policy and make sure you have the proper coverage.

Not Having a Current Home Inventory: When we were returning home from Iraq, we had to ship most of our personal things through a Connex.  We were required to make a detailed list of everything in our tote boxes in the event something was lost or broken.  Have you done something similar for the content of your home?  Most homeowners have not.

Without an inventory, you may only receive a tiny fraction of the value. Avoid this by taking a walk-through video of your home and talking about the larger items. Pictures will be needed, as well as a list of the cost and replacement value of each item.  One tip that I found really interesting is to upload your walk-through video to YouTube (private settings please–no reason to broadcast to thieves all the valuables in your home!).  That way you’ll always have the footage, even if your house is completely destroyed.

Medical Insurance

Many people simply can’t afford private medical insurance. Before you raise your hands in frustration and walk away, you need to realize that a major medical bill can bankrupt your family.  Something is better than nothing. Many states now offer basic health insurance based upon income levels; call your state offices for more information.

Again, raising your deductible will help if you have insurance but are struggling to pay for it. See what kinds of plans your company offers, and if you can get insurance through your work. Compare the health plans and make sure you are comparing apples to apples, even with the complicated wording of many policies. Also, take advantage of health savings accounts that let you put aside money to pay for medical expenses, tax free.

Since starting my own business a few years ago, we’ve been covered on my wife’s plan through her job.  With her recently making the decision to be a stay-at-home mom, we were forced to get private insurance.   Talk about an experience!

We called several local agents and also used eHealthInsurance.com to make sure we got exactly what we needed.   It took a lot of note taking, phone calls, and asking tons of questions, but we finally got what we were looking for.

Keeping on top of your insurance costs and options will save you money immediately and in the long run. The key is to do some comparison shopping.

Editor’s Note: Don’t understand how health insurance works? Check out our Young Man’s Guide to Health Insurance.

Life Insurance

According to a recent study, over 35 million U.S. household have no life insurance whatsoever. None.  Zilch.  Nada.  Really?

How do you know if you need life insurance? If someone would suffer financially if you died, you very likely need it.

For you men that don’t have any life insurance, face it: you are not Superman!   There is about a 100% chance you are going to die, so you might as well get used to the idea.

Most people don’t buy life insurance because they think it costs too much.  Not true!  A healthy 35-year-old man can get $500,000 of term insurance for 20 years for the price of 6 Double-Doubles per month at In-N-Out Burger.  While you won’t get the same immediate gratification when making the payment, you can rest assured that your family is taken care of.

If you think you’re all good because you have life insurance with your job, think again.   What if you lose or change jobs?   Now you’re at the risk of your new employer not offering it and then being forced to find it on your own.   It’s better to go ahead and buy a 20 or 30 year term life insurance policy now so that you’ll never be faced with that predicament.

Suggested Types of Insurance

While the types of insurance listed above are ones every man really should own, these next two are policies I know everyone is not going to go for, but that I strongly recommend having.

Disability Insurance

While I was easily convinced that I needed every insurance above, I initially balked at the idea of getting disability insurance.   I tried to convince myself that I didn’t need it, but let’s face it–statistics don’t lie.  Check out these stats:

One out of every seven workers will suffer a five-year or longer period of disability before age 65, and if you’re 35 now, your chances of experiencing a three-month or longer disability before you reach age 65 are 50%, according to the National Association of Insurance Commissioners (NAIC). If you’re 45, the figure is 44%.

How Much Disability Income Insurance Do You Need? The key to determining your needs is to assess how much you would be required to spend during each week or month that you would be unable to earn your normal pay. For example, if you would need 80% of your pretax earnings but your group policy would only pay an amount equal to 60%, then you may need additional coverage.

Disability insurance can be tricky, so it’s important to ask the right questions.  This article from the New York Times addresses the key questions to ask before purchasing the policy. Here are a few examples:

  • What percentage of my income will you replace if I become disabled?
  • Will you cover commissions or bonuses on top of a base salary?
  • Can the payout go up as my income goes up in the future?

Before purchasing my long term disability policy, I made sure to shop around and compare the features. One of the companies that I looked into would only get me a monthly benefit that was 40% less per month and whose premiums were twice as much.   So yes, it does pay to shop around.

Umbrella Policy

How many times have you been in a situation where a sudden downpour leaves you soaked and thinking about how much you wished you had an umbrella?  For me, too many.  An umbrella policy will give you that added protection and keep you “dry” from any major incidents.

How it works.  An umbrella insurance policy essentially rests on your existing insurance policies for your vehicles and your home. They provide extra protection in the event of a situation not fully covered by your normal insurance. Umbrella policies cover the gaps left by your existing insurance coverage.

For instance, let’s say you are sued for liability in an auto accident and the judgment is declared against you for $500,000, but you only have $200,000 worth of liability coverage. The rest of the money would have to come out of your own pocket unless you had the umbrella coverage to fall back on. Without the additional umbrella insurance protection, you are susceptible to losing all of your assets to pay off the outstanding debts, including your home.

Personal umbrella insurance policies are often misinterpreted by consumers and are surrounded by myths so often that people can fail to recognize the importance of having additional coverage when they need it most. I’m amazed at the number of people I come across that don’t really understand the basics and benefits of umbrella policies.

Umbrella insurance policies are thought to be too expensive to afford for average-income consumers and are too complicated to fit in with the insurance coverage you already have. But for many, the added protection of an umbrella policy may be just what your family needs.

Some real life examples.  It’s easier to illustrate how an umbrella policy would work using real life situations.   An article by CBS MarketWatch gives several instances that are very common.  Here are some of the examples that could easily happen to anybody.

  • You throw a party at your home where alcohol was involved and minors were present.  The minor has a few drinks without you knowing and drives home and gets in a wreck.   You could be on the hook even if you didn’t provide the alcohol.
  • You act as chaperone of young kids on a field trip to a park where one of the kids gets injured.   The parent of the child claims that your kid doesn’t like their kid and that’s why you let him get hurt.
  • You’re driving home from work and collide with a company truck hauling very expensive equipment.
  • Your child borrows a friend’s car to run to McDonald’s to grab something to eat.   While hurrying to get back they run a stop sign and hit a mini-van with a family of four.

The right umbrella policy could protect you from the incidents listed above.

What’s the cost? For $1 million in coverage, the cost should be around $150-$200 (mine was $180) a year. For each additional $1 million in coverage, you should expect to pay an additional $100.

***

Think you’re less of man, because you have insurance?  Don’t.  In Iraq, all it took was one IED blowing up or a bullet whizzing by to appreciate the protection we had with our equipment.  Don’t get caught with your guard down and make sure you’re properly insured.

_______________________________

Jeff is an Illinois Certified Financial Planner who authors the blogs Good Financial Cents and Soldier of Finance. He is a father of 3 awesome boys, husband to the coolest chick on the planet, In-N-Out Burger junkie and Crossfit addict.

{ 44 comments… read them below or add one }

1 Josh December 22, 2011 at 3:01 pm

A note on health insurance, for when you can’t afford it or choose not to have it:
Tell those billing you that you don’t have insurance. If you go to the doctor frequently for small things, then lack of insurance is an expensive thing. If you’re like me and only go to the doctor when failure to do so could be extremely dangerous, then you can do this, provided you have a hefty enough emergency fund. Simply informing the people doing your billing that you have no insurance and will pay it yourself out-of-pocket will nearly always get you a drastic price cut (75-80% off. And if they don’t offer it upfront, ask for a discount. Most will do so for non-insured patients). Well-run hospitals know they can’t charge full price because the average person can’t pay it anyways, and payment is more likely when the fee is smaller. They also can’t turn you down if the situation is immediate and life-threatening (emergency rooms legally have to treat/stabilize you to a certain point regardless of whether you plan on paying or not, but anything else will likely need to be paid for in advance)

2 Ryan December 22, 2011 at 3:28 pm

As an insurance agent and owner of an independant agency (meaning we sell for multiple companies and are not just employees of a single big name company), I have to say this is the first acticle dispensing insurance advice I have read online that is mostly accurate. Good job.

3 Chris December 22, 2011 at 3:36 pm

Great article, thanks for sharing all this information? Sorry to ask for more, but is there any chance you could comment on Renter’s insurance?

4 Edward Adamsky December 22, 2011 at 3:40 pm

As an Elder Law Attorney, I also recommend that, as you get older, you consider Long Term Care Insurance. It’s the only insurance that will pay for basic care needs if you are disabled or infirm. The cost of Long Term Care can ruin a good retirement plan.

5 Dave Turner December 22, 2011 at 4:09 pm

I wonder about Long Term Care Insurance and hoped that it would have come up in the article. At 55, I have to make a decision soon about it. I am in good health and work to take care of myself in all aspects of life and instead of paying the premiums, investing that money. It is just a thought. Also having helped many wives through their husbands death, lack of life insurance is very much a burden on these widows. If you love your wife, invest in life insurance.

6 Mike D. December 22, 2011 at 4:34 pm

You’re missing renters insurance. It’s very important that you get renters insurance if you’re renting. Not everyone knows that your landlord’s insurance does not cover your things.

7 Brad H. December 22, 2011 at 6:11 pm

coming from me, and insurance man, I think you’re spot on.

8 Richard December 22, 2011 at 8:05 pm

Pfft…Health insurance. No need for that in Canada! :-)

9 Kevin December 22, 2011 at 9:10 pm

You mentioned in the article about doing a video tour of your home and posting it on youtube. Another idea to use with a video (as well as photos, inventory, and any other important documents for that matter!) is to scan/photograph them and save them in a Dropbox folder. It’s free, safe, and secure (after all, what good are an inventory and photos if they burn up when your house does?). The files are stored “in the cloud”, not on your harddrive, so they’re protected from disasters that would ruin ordinary media.

10 Jeff Rose December 22, 2011 at 10:26 pm

@ Edward and Dave -

LTC could have been brought up, but typically I don’t start talking to clients about that until they are 50ish. @Dave, I’ve covered LTC on the blog a few times. Here’s one article that might help you out: http://www.goodfinancialcents.com/long-term-care-insurance-quotes-rates-how-much-do-you-need/. I had quizzed an elder law attorney to get her suggestions for that article.

@Chris and Mike. You’re both right about renter’s insurance. Personally, I’ve never had it (other than for my current business building that we rent). I found this piece from another blog that I follow that might help you out: http://freefrombroke.com/what-is-renters-insurance-why-do-i-need-it/

@Kevin. Good suggestion about My Dropbox. I use it for my business but never thought about it using it in that format. Great tip!

11 Bastian Kröhnert December 23, 2011 at 6:43 am

I love this blog, but an article recommending life insurance as something every man should have, does not really meet the usual standard.

First and foremost life insurance is the most effective money machine for insurance companies, meaning that the companies benefit much more from it than you do.

Learn how to invest money and you don’t have to worry about a product that predominantly targets very insecure people.

12 Jeff Rose December 23, 2011 at 9:49 am

@Bastian.

Have to respectfully disagree. Life insurance, in its basic form, is to protect your family in case something happens, period.

“Learn how to invest money and you don’t have to worry about a product that predominantly targets very insecure people.”

The statement makes a lot of sense, but let’s look at it reality. Most people that really need life insurance are working individuals (maybe with children or not).

What about a young couple starting out with a young child? Even if they started investing, like you suggest, I find it very unlikely that they would have had the time or resources to invest what they needed if something happened to one of them.

Case in point example: I have a widowed client who has a 4 year daughter. Her husband died unexpectedly. She was fortunate to have had a husband that purchased well over $1m of life insurance. He was only 28 when he died. I’m not sure about you, but I don’t run into many 28 year-olds with over $1m dollar of investments.

13 jeff December 23, 2011 at 11:00 am

Don’t forget renters insurance! And make sure it covers fire, and water damage, not just thief.

14 Josh B December 23, 2011 at 12:46 pm

When you are evaluating your auto policy, you should maximize your under/uninsured coverage. As an attorney, I’ve seen the benefits of high coverage and the sad repercussions of inadequate coverage. Medical bills can rack up quickly, and you may be surprised to see how little your monthly premium goes up for doubling or tripling your coverage. If you have an umbrella policy, you coverage could be very high – check with your provider.

15 Jonathan December 23, 2011 at 12:51 pm

Jeff you mentioned you don’t discuss LTC until someone is in their 50′s. What if you’re in your late 20’s?
I took the LTC offer from my company for $7 plus change a month. Price only goes up if I accept the inflation adjustment.
In your experience is LTC a waste of money if your younger? I plan on staying with my company for the long haul and they still cover you when you retire. I know there is always the risk of being fired, but I think it is a good one to take.

16 John December 23, 2011 at 1:34 pm

Most financial professionals suggest that you don’t buy LTC insuance until you reach 50, but before 60. That is when it is the most feasable. You won’t be paying for a half a century before you need it. The cost really starts to go up once you hit 60, but is still affordable when you are in your 50′s. You do want the inflation endorsement. What may seem like plenty of money to cover long term care today may not be near enough when you are 78, 50 years away. You may be spending a week or more of benefits just to get one day of coverage that far away. Most of us don’t need LTC insurance when we are young. I suppose it would be nice if something did happen before you were old, but the chances of that are slim.

17 Joe December 23, 2011 at 1:35 pm

What about whole-life insurance? I’ve heard a lot of financial people say it’s a convoluted insurance trick, but my financial adviser says that it’s a really good combo of a 401k and term life insurance. Your thoughts?

18 Dave December 24, 2011 at 4:37 am

Just getting the insurance isn’t enough.

If you have a homeowner’s insurance, but your house is filled with faulty wiring, the insurance company won’t cover anything when it burns to the ground. Even if it didn’t burn down because of an electrical fault.

19 Jeff Rose December 24, 2011 at 10:20 am

@jonathan

For $7/mo, that obviously isn’t going to break you, but I really don’t see the benefit. I probably won’t even consider LTC until I’m 45ish. Plus, they are now releasing hybrid type insurance/annuity products that have a LTC benefit on the backend. That means that if you don’t ever use the LTC benefit, you still at least have either insurance or an annuity paying you a little bit of interest. Essentially, you don’t have a complete sunk cost.

Once again, I wouldn’t even look at these type of products until 45-55. Hope that helps!

20 Jeff Rose December 24, 2011 at 10:28 am

@ Joe (re: whole life insurance)

First, let me say that for the 1st 10 years of my investment career, I didn’t get whole life insurance. I thought it was a complete waste and bought into the “buy term, invest the difference” mantra. I still follow this, but I’m definitely more open to listening whole life insurance (same thing for index annuities and index insurance).

Why the change for me? The stock market has been anything than man’s best friend for the past couple of years, and more and more investors are just getting fed up. Although a much more expensive investment/insurance product than term, whole life offers a guarantee that the stock market doesn’t. (Disclaimer: I have never sold a whole life policy in my 10 year career)

If you are considering a whole life policy, don’t put all your money into it. I see many insurance agents lead with whole life as the first and only option. Most times I see this, the clients are paying way too much for insurance coverage and don’t nearly have enough. Get the appropriate coverage with term, then consider whole life as a compliment to your overall plan.

21 Jon December 24, 2011 at 10:49 am

Great article. Well written, concise, informative, accurate and interesting. Another truly helpful piece from AOM. I’d love to see more on this topic.

22 Jeff Rose December 24, 2011 at 11:59 am

@ Jon

What more would you like to see? The only reason I ask is that I’ve covered a decent amount of info on life insurance on my own site and am planning to cover more.

23 Jack December 26, 2011 at 6:46 am

You left out one increasingly common disaster that wrecks a lot of guys financially…identity theft! After talking with some police friends of mine that investigate it I learned how much it can cost you to get your life put back together even if you did nothing wrong. Something like Life Lock is another great form of insurance.

24 Adrian December 27, 2011 at 11:06 am

As a licensed adjuster, I would like to weigh in on a few things here.

Regarding auto insurance, it is a good idea to shop around, however you need to be aware of what kind of coverage you are getting. Yes, raising your deductible can save you money–something like 75% of people carry the $500 deductible, because hiking it up higher won’t save you enough for it to be worth the higher deductible.

Another thing to consider is whether you should carry comprehensive/collision coverage at all. If you have a small, domestic-made car whose age is anywhere in the double-digits, the value of your car is probably in the $500-$5000 range, depending on the condition and the mileage. If you have that amount of money in the bank, you can afford to replace your own vehicle and might consider “risking it” to spare the $200-$500/year that an insurance company will charge to underwrite the collision coverage.

Another thing to think about when considering whether to buy collision and comprehensive coverage is the possibility of other costs besides repairs that come along with an accident. If someone hits you, and it’s their fault, you would be entitled to collect against them, but their insurance carrier won’t do anything for you until they are done invetigating (getting police reports takes 14-21 days normally, 30-60 if you live in New Orleans). If you don’t have your own collision coverage to start getting repairs completed, you could be without a car for a while, and you may also have to come out of pocket at first for renting a replacement vehicle. Tow fees are another nightmare. Rural locations will probably charge you between $150-$250 for towing and storing your vehicle a few days. Urban areas, notably Houston and Kansas City, generally charge somewhere around $900 for the same 1.5 hours of work. Collision coverage will usually include your tow costs, but generally you have to buy rental coverage separately. You cannot get tow coverage or rental coverage without buying collision coverage first.

Every state mandates that you need liability coverage, which pays other people if you hurt them or damage their property. You may be thinking: “Why not take a risk there, too?” but don’t do that. If you rear-end someone, and they go through their own insurance coverage to complete their repairs, the insurance company has a legal right to recover what it lost from you. If you don’t have liability insurance, then that insurance company will attempt to take the money from you directly–and if you don’t cooperate they can have your license revoked, wages garnished, or damage your credit (or all of the above :). Carrying the state minimum liability coverage USUALLY protects you from all damages, regardless of whether or not the other party’s claim is worth more. If you T-bone someone and break their femur, then their claim may be worth $50k-$100k, depending mostly on the county in which you live and the health of the other person before the accident. If you carry $30k in state minimum coverage (every state is different), then your insurance company will cough up that money to the other party and their lawyer as soon as possible. To get that money, the other party will have to “release” you from all claims, which means that he waives his right to sue you for anything regarding the accident. PHEW. Most people who have serious injuries take the money in your insurance policy, even if it is lower than their medical bills, because filing a lawsuit can take years, and if you have no assets, then even if they get a million dollar verdict against you, you have no way of paying them, so what’s the point? Sometimes people will still sue to prove a point, but this is very rare. I am not sure I have ever seen it happen–certainly not on a case I have handled.

If you do have assets — a nice fishing boat, a sports car, investments, or rental properties, then you should carry more than the state minimum liability coverage. If the same person with a valid $100k claim figures out that you have something to take, and they have a reasonable belief that a jury would sympathize with them, then they will say “No thanks” to your insurance carrier’s $30k offer, and then they will sue you (or, first, ask you nicely to pony up). Buying $250k in liability coverage is not that much more expensive than buying $30k in liability coverage, simply because 95% of the injury claims an insurance carrier gets are worth less than $20k-$30k. From an insurance company’s perspective, even if you get in a wreck and hurt someone, they probably won’t be hurt all that badly, so selling you an extra $200k in liability coverage can be done cheaply, since you’ll likely never need it.

My only asset is my car — worth maybe $10k. I don’t have any other assets that could be taken in a lawsuit (my checking account and 401k do not count), so I could be justified in buying minimum coverage. Since I am single, excessively cautious (nay, paranoid?), and my driving record is good, I choose to buy the maximum liability coverage that I can. At little cost to me, if I do seriously hurt someone, they will be able to collect something fair.

This post is not intended to be legal advice and does not by any means cover every scenario — since every state has different laws, it is always good to talk with an insurance agent before purchasing coverage. (If you have a friend who is an experienced adjuster, this is much, much better).

A good rule of thumb when purchasing insurance coverage is that the more, the better. If you can afford it, buy it. What else are you going to spend your money on? Fast food? Set good priorities and spend your dime accordingly.

25 Adrian December 27, 2011 at 11:11 am

Last thing: buying any amount of liability coverage includes a free defense attorney, if you are sued. Very important.

26 Joe December 27, 2011 at 11:26 am

I was wondering if you could do an article on life insurance you can use while you are still living. What are benefits and downsides?

27 Micah December 28, 2011 at 3:57 pm

Not all jurisdictions require auto insurance; the article is in error.

28 Micah December 28, 2011 at 4:00 pm

The suggestion that one needs life insurance is buffoonish and financially illiterate. Life insurance is a waste of money, unless you have children, and then only up to the age of majority. Disability insurance, on the other hand, is a good idea, as you’re far far more likely to become disabled than die during your working years.

29 Edmvnd December 30, 2011 at 12:33 am

If you bought all of the insurance listed in this blog, you’d be broke.

Insurance and credit are scams.
Especially those mandated by Uncle Sam.
Simple as that.

Work. Save. Live debt free.
Used to be the American way.

30 Richard January 1, 2012 at 9:13 pm

Have a reasonable deductible on your home owners insurance, when a disaster hits the other uninsured expenses can eat away at you nest egg quickly, making paying your deductible difficult. We had some damage due to the tornadoes on April 27th, then in June another storm took our roof. Two deductibles to have the two (2) repairs completed. We learned to keep enough spare cash.

31 Dave January 2, 2012 at 12:08 pm

Regarding car insurance in places like New Jersey, men (and women) should be aware that it is important that when purchasing car insurance in this state you should not choose the Limitation of Lawsuit option since it will limit your ability to bring a lawsuit for injuries that you sustain during an accident. Other if a death occurs or significant injury like dismemberment can a lawsuit be filed if you choose the Limitation of Lawsuit option.

32 KevinCA January 4, 2012 at 7:35 pm

@Edmvnd: You’re terribly naive. Carrying auto insurance is mandated because if you injure another person while driving, we (society) want some assurance that you have the ability to make that person whole for his or her injuries.

Health insurance is a good idea because medical bills are expensive.

Life insurance is a good idea because if you’re the financial provider for your family, and you die, then their ability to make ends meet will be substantially compromised.

Your view is more than a little myopic.

33 Sean Cowdrey January 4, 2012 at 9:11 pm

As an attorney who defends health care providers when they get sued, and who spent many years defending average folks who got sued, I can tell you that one of the biggest benefits of auto, homeowners, and umbrella insurance is the attorney’s fees coverage. If you get sued for an auto accident, a slip and fall on your front porch, defamation (slander/libel), or a whole host of other incidents, even if the lawsuit is frivolous and you “win,” your insurance company will pay all legal fees and costs incurred for your defense. This alone will save you anywhere from $25,000 in a small case to $150,000+ in a bigger case in legal fees.

34 Jordan Smith January 7, 2012 at 8:05 pm

Brett and Kate definitely picked the best guy to do the article. The ethos behind it is enough to convince me!

35 Edmvnd January 8, 2012 at 3:11 am

@KevinCA

“Society” doesn’t exist.
Just individuals.

Medical bills are expensive because government involvement has driven up prices. Like it does in any case. Always. No exceptions.

The world isn’t a safe place. Thanks to terrified little children like yourself, I have to shell out over a grand a year to an insurance company.

Call it naive, but I imagine you would drive a little more cautiously if you were expected to be held financially responsible for damages you cause. Perhaps you would think twice about owning a $30,000 luxury sedan when you have to parallel park it in the city.

Life insurance. Maybe.. maybe it’s a good idea if you’re so irresponsible as their “provider” that you’re over extended, in debt and have a family dependent on you. But even then, you’d be 100x wiser to spread that money across the stock market and perhaps reconsider the limits of your finances. Chances are, you’re not going to kick the bucket in time for it to really pay off anyhow.

Bottom line: A fool and his money will always be separated.
Insurance companies looooooove guys like Kevin.

36 Fabio January 9, 2012 at 4:01 pm

It’s right many insurances are not really necessary. Anyway the tip with the low-mileage deduction sounds good to me.

37 Dale January 11, 2012 at 1:32 pm

DO NOT skimp on home owners insurance. Make sure you have replacement value for your home and contents of the house. Also, make sure you have a good amount on the policy for living expenses.

On January 19th, 2011, I hurried home from work to find my wife and kids standing in the snow watching our house burn.

My first call was to our insurance agent. The next day I had a large check for living expenses. In 2 months a check for the structure. The 3rd month a check for contents. We had the house completely leveled and started building a new house on the same property.

In October, almost 9 months to the day, we moving into our fantastic new home.

Because my wife and I took the extra 15 minutes to really read our policy and ask questions when we purchased insurance back in the 90′s, we had no problems getting everything we needed from our insurance company when we needed it.

38 KevinCA January 11, 2012 at 4:08 pm

Edmvnd – I’m not terrified of you Ed. I laugh at people like you, heartily and at length. You’re all insults and no substance, a typical drooling troll who lives in his mother’s basement, posting about matters beyond your feeble comprehension.

People like you, who babble on endlessly about the ebbbil gubmint oppressing the rights of the sovrun people provide a veritable buffet of entertainment.

Yes, I’m glad you can’t register your car without proof of insurance. It would be impossible to recover from you since you clearly don’t have two nickels to rub together.

Among the myriad problems with your premise is that we don’t live in the Nirvana that exists only in your your feverish masturbatory fantasies. Given that we live in the reality that we do, certain insurance coverage is optimal.

“100x wiser”? Again, perhaps in the world that exists in your head. But not by any rational financial analysis performed by anyone with an IQ over your shoe size.

You’re not an independent thinker, a maverick. You’re a loon.

39 Edmvnd January 14, 2012 at 5:34 pm

I don’t think government is evil, Kevin.
I never said you were terrified of me, either.

The fact that you go so far out of your way to insult me so many times accomplished nothing but a “feverish” masturbation of your ego.

But I’m glad you got that pseudo-intellectual diatribe out of your system. Feel better?

It’s nice having the internet and a couple thousand miles insulate you from the violence you’d incur if you were to ever speak to someone in that manner in person, isn’t it? You’re a coward, Kevin. And unlike your many assumptive insults, I say that based on your words. Something I can actually point to.

Goodbye, Kevin. Thanks for the laughs.

40 KevinCA January 17, 2012 at 4:58 pm

Ed – “Thanks to terrified little children like yourself….” There’s a log in your eye.

Like you’d have the temerity to tell someone that he’s a terrified little child in person.

At any rate, your premise that if there were no auto insurance, that everyone would drive carefully, obviating the need for insurance is, as I said, profoundly naive and ignores human nature.

From a purely practical perspective, it ignores the financial reality that the average US person does not have the personal balance sheet to shoulder the cost of making another driver whole, if he causes an accident.

So, if we did away with auto insurance, then there would be a vast number of unsettled claims.

In your hypo, were we to do away with auto insurance, and a poor person were to cause a accident with you, then you would be responsible for: (1) the costs of repairing or replacing your own car, (2) handling your own medical costs (remember you also did away with medical insurance — hope you have a few hundred thousand in savings), and (3) supporting the cash flow you and your family need while you’re recovering from the accident.

And remember, you don’t have uninsured motorist coverage of your own. Since neither you, nor the at-fault driver has auto insurance, then he’s now bankrupt as a result of your (presumed) tort judgement against him for your injuries, and you’re out of luck since you don’t have any either.

How does that make any sense at all? Right. It doesn’t. Which is why the states generally require you to carry — at a minimum — liability insurance.

If you really, strenuously, object to any of this, please run for office, and propose legislation.

41 Edmvnd January 19, 2012 at 2:36 pm

I just deleted my two thousand word essay. The only two points I’m concerned with are:

1) I don’t say anything online that I wouldn’t say to any human standing in front of me.

2) Mandated insurance has nothing to do with mitigating risk and everything to do with removing personal responsibility. Every human being is an actuary. And he is judging the risk he wishes to assume. If you remove that responsibility, you have just destroyed the incentive for him to act responsibly.

Your scenario makes perfect sense if you take the current structure of interdependent insurance (auto and medical being the two largest) and only remove one. They all have become rooted, intertwined and inflated due to governmental market meddling, lawyers and the pleading masses hoping someone will take care of them.

All of human action is based on incentive. As Napoleon said: “Men are moved by two levers; fear and self-interest”

42 mechaliki September 28, 2012 at 1:15 am

Get a bike, get an apartment.

Register your bike with local police (if they offer the service), get renters insurance with your health insurance.

BOOM.

43 MJ December 13, 2012 at 12:12 pm

Great article. Insurance is one of the greatest products ever invented (no, I’m not a salesman). Term Life is a very cheap way to protect your loved ones. Something happens to you and they could be very comfortable for the next 10 to 20 years depending on how much coverage you have.

44 fbo391 January 16, 2013 at 7:51 pm

hi , as you talk about insurance , my question is ; Is there such policy when a person hurts another person in a bar fight , that person is liable for damage .to other person injuries.. what kind of insurance is that and where may i apply for it, even so its were self-denfense ,,i ben amember with AoM close two years now and i save few articles that i love for safe keeping …thank u

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