What Insurance Should You Buy? Part 1

Everyone needs four basic insurance policies: Home, Auto, Health, and Life. I am going to give you very broad and brief overviews of these policies, but please know that you should speak to your insurance agent before making any changes in coverage. If you don’t have an insurance agency that you have a good relationship with or you would like a second opinion, my agents at Trumble Agency are always available to talk with you about your coverages and they hold the same standards that I hold. 

Before we start taking a look at individual policies, I’d like to first discuss self insurance in the form of deductibles which applies to all insurance policies. 

On nearly all insurance policies, you are able to choose your deductible. The higher deductible, the lower the cost of the insurance premium. Why? Because in the event of a claim, you are pledging to take more of the financial loss if you have a higher deductible. 

I don’t want to pay a penny more than I have to to for my insurance coverage, however, I also can’t afford to pay a penny less than I should. Why? Because even though an insurance premium may be cheaper with a higher deductible, you must be prepared to pay that deductible if something happens. If you’re at the beginning of your financial journey, you may be unable to afford to purchase a cheaper policy with a $10,000 deductible. You may need to purchase a slightly more expensive policy with a deductible more in line with what you’re willing to potentially have to pay. We recommend that your deductible NEVER exceed your New Checking Zero (one month of expenses), but before you have fully funded New Zero, we recommend a deductible of $1,000 or less. 

Homeowners Insurance

Homeowners insurance, or renters insurance if you don’t own where you live, protects two primary categories of loss: Property and Casualty. Property is what it sounds like. On a homeowners policy, you’ll have protection for the house itself, any outbuildings, and your personal property such as your couch, clothes, silverware and things like that that aren’t attached to your house. For items that are particularly valuable such as jewelry, collectibles, heirlooms, guns, or recreational vehicles, it is important to talk with your agent about what is and what is not covered for those items. If you have special collections of memorabilia or other valuables, make sure to discuss what coverage is and isn’t provided on a standard homeowners policy and if there are any additional coverages you should consider purchasing. [find a way to make this more concise in the workbook]

The second coverage that is provided on the homeowner’s policy is casualty insurance. If you are sued for something that happened in your home or on your premises, there is coverage to defend you in court and pay for damages or injuries that weren’t intentionally committed. In most cases, I always recommend $1,000,000 of liability insurance on your homeowners policy. It is cheap and if someone sues you, it isn’t going to be for $100,000 any more. They’re going to sue you for $1,000,000 so you might as well protect yourself for that, especially because the coverage is so cheap. 

Next week, I will outline several pro tips when purchasing Auto, Health, and Life insurance.

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Zach Santmier is the owner of Trumble Agency, Inc. and the author of the personal financial course, Increase. He focuses on helping families escape paycheck to paycheck living so they can freely pursue their ideal future.