Let’s admit it – most of us cringe when a bill for an insurance premium arrives in the mail. I know I do. That’s a natural response. After all, insurance – any kind of policy – doesn’t usually provide any type of immediate benefit. Unless you have an active claim for health insurance or car insurance, paying insurance premiums can seem like a waste of money.
But that’s really the whole point of insurance, paying for it when you don’t need it so it will be available for when you do. Having the right insurance in place – and enough of it – is one of the most responsible things a man can do.
There are all kinds of insurance policies, some most people don’t even know anything about. But there are what you might call the Big Four that everyone needs: life, car, homeowner’s, and medical insurance. There are a couple more as well, but you need at least those four.
How I Became a Believer in the Necessity of Insurance
I learned a good bit about insurance from an unexpected direction. As a member of the Army National Guard, I was stationed in Iraq for a full year. As a matter of standard procedure, we were each issued a flak jacket or interceptor body armor (IBA). It meant carrying around an extra 16 pounds everywhere we went in the heat of the Iraqi desert.
Like paying insurance premiums, I hated having to wear that jacket. But we were at war, and the jackets were designed to save our lives in case of an attack. They were a necessary evil.
And so it is with insurance. We hate paying the premiums, but we love having the protection of the insurance benefits when an unexpected disaster occurs.
I hated wearing a flak jacket, just like I dislike paying insurance premiums. But I fully appreciated both are absolutely necessary.
Here are the types of insurance a man needs to protect himself financially:
Here’s a seriously disturbing statistic: 41% of Americans have no life insurance.
Now to be fair, some may not be able to afford life insurance, particularly if they have a chronic health condition. And if the health condition is serious enough, they may be unable to get any life insurance at all.
But that certainly doesn’t describe the majority of people. If you’re in average, good, or excellent health you should be able to get a relatively inexpensive term life insurance policy. And even if you have a health condition, you can usually still get a policy. It will come with a higher premium, and a lower death benefit, but that it will be better than having no life insurance at all.
If you’re single and have no dependent, you may have no serious need for life insurance. But if you’re married, have children, or are responsible for the care and support of other family members, you should absolutely have a policy in place. That will make sure your loved ones are cared for if anything should happen to you. It’s the responsible thing to do.
Despite the fact that having car insurance is required by law in 49 out of 50 states (New Hampshire being the exception), millions of men continue to go without it.
There’s no question car insurance is expensive, especially in some markets. But unless you’re single, and absolutely can’t afford it, you need to have it. That should be the case even if it isn’t required by law.
But it’s especially important if you have dependents. You may want to take a chance of going without car insurance, but you’ll be jeopardizing your family’s financial security if you go without it.
First is the issue of liability. If you’re involved in an accident that causes injury to the other person, or damage to the other person’s vehicle, and you’re determined to be at fault, you’ll need to come up with funds from your own resources if you have no insurance. That could leave you broke or facing a judgment that can result in garnishing your wages and bank accounts.
Then there’s the loss of your vehicle. If it’s totally or substantially destroyed in an accident, and you don’t have proper insurance coverage, you won’t have a car. That will almost certainly impair your livelihood. And that’s not fair to anyone who is depending on your income.
Saving Money on Car Insurance
There are ways to save on the cost of car insurance:
- Shop around among several auto insurance companies. There can be significant differences from one company to another.
- When replacing your current policy, make sure that lowball quote you get from a competitor is for a comparable level of coverage. Shrewd insurance representatives often lure you into a cheaper new policy by lowering coverage amounts, or eliminating certain provisions entirely.
- Take the highest deductible you can afford. Increasing your deductible from $500 to $1,000 can lower your premium by as much as 30%. Just be sure you have the money in an emergency fund to cover the deductible should the worst happen.
- Ask about discounts, there are all kinds. You can get them for safety equipment, bundling policies, driving fewer miles, or if you’re a student, having good grades.
When it comes to discounts, it’s best to ask the insurance company (or even your current company) to provide you with a list of all the possibilities. Only you can know which discounts will apply to you, and that will give you an opportunity to take advantage of the largest number of them.
Homeowner’s or Renter’s Insurance
Unlike car insurance, homeowner’s insurance isn’t required by law. But if you have a mortgage on your house, it will be required by your lender. After all, your home serves as collateral for your mortgage, and your lender wants it to be fully protected.
Unless you live in an area where there are earthquakes or floods, homeowner’s insurance is generally much less expensive than auto insurance. And you can find plenty of discounts here as well.
Two of the best ways to lower your premium are to bundle your homeowner’s policy with other plans, particularly auto insurance, or to increase your deductible. But just as is the case with car insurance, make sure you have sufficient money in your emergency fund to cover any contingencies. Homeowner’s insurance deductibles can run in the thousands, and you need to be prepared in advance.
You may also be able to get a loyalty discount if you stay with the same company year after year. And if your home has certain security equipment, you may get further discounts in your premium.
Special Considerations with Homeowner’s Insurance
When it comes to homeowner’s insurance, there are some factors the average consumer isn’t aware of:
- A basic homeowners insurance policy does not provide coverage for damage resulting from flooding or earthquakes. You’ll need a separate policy for either hazard if you live in an area that’s prone to those events.
- You only need to insure the house itself, not the land around it.
- Make sure your policy also has an inflation protection provision. Not only do property values rise over time, but so do repair costs. An inflation provision will protect you from those higher expenses.
- Take a current inventory of the contents of your home. Taking photos or videos of every major possession is also recommended. You’ll need to provide this inventory to your insurance company if you make a claim. Otherwise they may pay only some minimal estimated value.
- Be sure to upgrade your policy if you improve your property. For example, if you add in addition to your property, you’ll need to increase your coverage.
Many tenants mistakenly assume they’re automatically covered under their landlord’s insurance. They’re not. The landlord’s insurance covers only the building itself. It does not extend to your personal possessions.
That makes sense because your personal possessions are yours, not your landlords. For that reason, you’ll need to get a renter’s policy.
Fortunately, renter’s insurance is inexpensive. For as little as $15 or $20 per month you can cover your possessions for $25,000 or more. Renters policies also include liability insurance, in case someone is injured inside your apartment, or by your pet.
The cost of medical care has exploded in recent years, so much so that very few people can afford to pay for a major event at of their own resources. The average cost of a hospital stay nationwide is over $10,000, and it can be a lot higher if you have certain health conditions.
But not only do you need adequate health insurance to get proper care, you also need it to protect your assets. If you have $50,000 in savings and investments, and have a modest medical event of $25,000, half your wealth will be wiped out from a single event.
Hopefully, you have a health insurance plan available through your employer. Since most plans include a generous subsidy from the employer, your monthly premium cost should be no more than a few hundred dollars.
But if you don’t have coverage through work, you’ll need to get a plan through Heathcare.gov. The policies are expensive, but may be reduced by tax subsidies if you have a lower income level.
One problem however with virtually all types of medical insurance policies today is out-of-pocket costs. These include copayments, deductibles, and coinsurance provisions that you must pay out of your own resources. On many plans, these can amount to several thousand dollars per year.
Once again, a well-stocked emergency fund will be your best protection. If your plan has an out-of-pocket maximum of $6,000, you should have a similar amount in your emergency fund.
You may be in luck if you’re self-employed. If you meet certain very minimal requirements, you’ll be able to deduct the full cost of your health insurance premiums paid during the year.
Other Types of Insurance You Probably Need
We just cover the four most basic types of insurance the average man needs. But there are a couple more that can be just as important.
According to the Social Security Administration, one in every four people will be disabled at some point in their adult lives. If you become permanently disabled, you’ll be covered under Social Security disability. But Social Security disability can take many months to kick in. In addition, the vast majority of disability situations are temporary, and won’t qualify for Social Security disability at all.
That’s why it’s important to have some type of additional disability insurance in place. At a minimum, you should have short-term disability. That will provide coverage for anywhere from 30 days up to one year. It can provide benefits while you’re awaiting permanent Social Security disability, or during a temporary disability situation.
Many people are covered by short-term disability through their employers. But if you’re not, or you’re not satisfied with the level of coverage your employer policy offers, you may want to get your own plan.
Disability insurance is more complicated than most other types of insurance. For example, they’ll typically pay only a percentage of your employment income. That’s usually about 60% of your salary. And of course, that benefit will only be paid for a certain number of months.
It’s not perfect coverage, but it can certainly help you manage your finances during an episode of short-term disability.
An umbrella policy is a provision that adds additional coverage on top of an existing policy. For example, if you have an auto insurance policy with a liability limit of $300,000 – but you have $3 million in assets that could be attached in a lawsuit – you can add an umbrella policy to cover the additional $2.7 million.
You can make the same provision with different types of insurance. You just have to have the base insurance policy already in place, and the umbrella policy can be added on top.
In addition to higher dollar amounts of coverage, umbrella insurance may cover certain events not included in your regular insurance policy. For example, your regular auto insurance policy may cover you for personal driving. But if you also use your vehicle for business, you may be able to add an umbrella policy to cover that part of your driving activity.
In both situations, an umbrella policy kicks in where your base insurance coverage ends.
Though umbrella insurance is mainly for high net worth individuals, it’s also worth serious consideration if you’re self-employed. You should have some type of business insurance policy in place, but they don’t cover all potential disasters. Also, to make a business policy more affordable, you may limit the maximum dollar amounts of coverage.
Adding an umbrella policy will increase the coverage amount, as well as cover certain non-typical potential disasters.
Fortunately, umbrella insurance is pretty inexpensive. You can get a $1 million policy for not more than $200 per year. And each additional $1 million in coverage will increase the premium by only about $100.
It’s a small price to pay for a very high level of coverage, that can protect you from a worst-case scenario.
Real Men Have the Right Insurance
There’s nothing manly about failing to carry the right insurance policies, and in the most appropriate amounts. Not even the bravest and strongest of men can prevent or prepare for all contingencies. And that’s exactly what insurance is for.
Make sure you’re covered for all the basic areas – including life, car, homeowner’s, and medical insurance. And if you need it, add a disability policy and umbrella coverage.
Knowing when to get help is one of the most intelligent things any man can do. The various forms of insurance available often provide exactly that kind of help.
This content is brought to you by Jeff Rose, CFP® from GoodFinancialCents.com®