The Insurance Check-Up: What Could Wreck You?

The story: Ana’s pile of policies

Ana sorts a stack of insurance bills on a couch while a friend, Lee, weighs how likely and how costly each risk is.

1. Narrator: Ana spreads the household’s insurance bills on the couch. There are a lot of them.
2. Ana: Phone protection, a gadget warranty, car, renters, life… Do we need all of these?
3. Narrator: Ask two questions about each risk: how likely is it, and how bad would it be?
4. Lee: A cracked phone screen is annoying. A house fire, a lawsuit or a lost paycheck could wreck you.
5. Narrator: Insure the disasters. Pay small, common costs from an emergency fund. Once that fund is there, a higher deductible can lower the premium.
6. Ana: So we drop the gadget add-ons and make sure the big risks are covered.

What you’ll learn

1. Two questions for every risk

   How likely is it, and how much would it cost? Rare but huge risks, like a house fire, a serious illness or a lawsuit, are what insurance is for. Small, common costs are usually cheaper to pay yourself over time. That’s called self-insuring.

2. Your emergency fund covers the small stuff

   A higher deductible usually means a lower premium. Once your emergency fund could cover the deductible, raising it can save money every year. Until then, a lower deductible may fit better, because a claim won’t sink the budget.

3. The core list

   Most households from 30 to 55 weigh the same core coverage: health, life insurance if anyone depends on you, disability, home or renters, and auto. An umbrella policy adds liability coverage once you have savings to protect or risks like a teen driver.

4. Skip narrow add-ons

   Coverage for one gadget, one illness or one trip is often pricey for what it pays. Broad coverage protects you from many disasters at once. Long-term care for yourself is a separate decision most people make in their late 40s to 50s.

Key words

risk

the chance that something costly goes wrong

self-insure

pay small costs from your own savings instead of buying insurance

Common questions

What is an umbrella policy?

Extra liability coverage on top of your home and auto policies. It helps if you’re sued for more than those policies cover. A lesson on umbrella policies is coming.

How do I know an insurer is legitimate?

Your state’s insurance department licenses insurers and takes complaints. The fact card links to every state’s department.

Remember this

Insure what would wreck you, not what would annoy you.

Try it: Total up your insurance

1. List every policy you pay for, with its yearly cost.
2. Mark each one: disaster coverage or a narrow add-on.
3. Add “insurance check” to your yearly money check-up list.

No account needed: list your policies on paper, or try it on the sample household in the demo.

Live facts

Numbers that change over time, with when they were last checked and where they come from.

• Your state’s insurance department

  Source: NAIC(opens in a new tab)