There are an overwhelming number of different types of insurance policies that a company will sell you to make more of YOUR money, THEIR money – health, critical illness, long-term care, long-term disability, accidental death and dismemberment, burial, travel, travel medical, homeowner’s, renter’s, umbrella, vehicle, rental car, umbrella, and, of course, you can insure almost any consumer product you purchase!

It can be exhausting to try to figure out what you need to purchase versus what is unneccessary. So, let’s break that down.

The Philosophy Of Insurance

Let’s start by saying that insurance companies are “for-profit” entities. They have teams of actuaries to make sure that they make money on every type of policy they offer. If they can’t make money on a policy, they just don’t sell it. So, if the company is making money on each class of insurance, who is not making money? The people purchasing!

It is necessary to frame insurance purchases this way in order to make good choices about what coverage to purchase. The company charges monthly or yearly premiums high enough to cover the actual insurance claims, ALL of the costs of doing business – salaries, buildings, equipment, etc. – AND to make a profit. This means, by necessity, each person purchasing insurance is paying far more than the statistical likelihood of the insured event happening times the estimated pay-out.

Should I Not Buy A Policy?

Now, I’m not against insurance. I just don’t want you to overbuy, leaving the insurance company richer and you poorer. Buying insurance is all about risk management. You are transferring to the company some (or all) of the financial risk of a negative event befalling you.

So, the wise mindset for determining what policy to purchase is to insure what you can’t financially afford to lose. Pretty simple, huh? Most of us can’t afford to have our house burn down, so we purchase homeowner’s coverage. However, most of us could replace a broken cell phone, so we probably don’t need to purchase an extended warranty for our phones. If you have an emergency fund, you can save all of the insurance and warranty fees. In the rare case that something is broken or damaged, you can fix or replace the item using your emergency fund.

So, let’s break down some of the most common types of insurance.

Protecting You

Health Insurance

Everyone needs health insurance. Let me say that again. From a risk management standpoint, everyone needs health insurance – no matter how much money you have (unless you’re Jeff Bezos), no matter how big your emergency fund. An article in The Balance cites several studies that found the leading cause of bankruptcy is medical bills. We all know that illness and injuries can happen without warning, and medical bills stack up fast! Not having health coverage – at least catastrophic health coverage – is taking a tremendous financial risk.

In general, there are three types of health insurance: Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), and High Deductible Health Plan (HDHP).

Types Of Health Coverage

An HMO is a type of health policy that has a list of network providers, including doctors, specialists, labs, and hospitals. An HMO usually charges lower premiums (than a PPO) and a low deductible. However, you must select a primary care physician (PCP). You also usually need to see your PCP for a referral to any specialists. An HMO does not typically cover non-emergency coverage outside the network.

A PPO is a type of health plan that provides more flexibility in choosing providers, either in-network or out-of-network, although out-of-network coverage is usually reimbursed at a lower rate than in-network providers. The flexibility of the PPO comes with the price of higher premiums and higher deductibles than an HMO.

An HDHP is similar to a PPO in offering flexibility in choosing in-network or out-of-network providers. Again, the plan usually reimburses out-of-network providers at a lower rate. A High Deductible Health Plan, as the name implies, has a relatively large deductible that you will pay before the insurer starts to pay. However, you will pay a lower monthly premium (usually much lower) than the PPO or HMO plans. This plan is appealing to someone who is generally healthy and doesn’t often have medical expenses.

Choosing A Plan

When choosing a health plan, you should try to balance the cost of the monthly premiums – you will pay this amount even if you NEVER visit the doctor – with the deductible you may have to pay if you have a medical event in a year; the deductible restarts each year.

Another important factor in your health insurance choice is the availability and benefits of a Health Savings Account (HSA) and/or a Flexible Savings Account (FSA). HSAs and FSAs are NOT health insurance. They are savings plans that allow you to save pre-tax dollars to pay out-of-pocket medical, dental, vision, and prescription expenses, including your deductible. Both of these savings accounts have the same list of qualified expenses that the IRS has approved, including many over-the-counter medications. However, you have to use up the FSA account each year, or you lose any balance in the account.

The HSA account can carry a balance from year to year (even into retirement). Depending on your trustee, you may even be able to invest part of your balance. However, the HSA is only available with a qualifying HDHP. If you choose a PPO or HMO, you can only qualify for an FSA. One last benefit of an HSA versus an FSA is that your employer can contribute (and often does) to your HSA but not to your FSA.

Other Options

Most people get their health plan through their employer. However, if you are younger than 26, under the current law, you can stay on your parent’s health plan even if you don’t live with them, even if you are married and have kids. However, if you don’t live near your parent’s house, ensure the “network” of providers exists in your area because out-of-network services are usually much more expensive than in-network providers. If you don’t have a health plan at work and are 26 or older, you can find individual or family plans in the online marketplace.

Critical Illness Coverage

Critical illness coverage is not health insurance. It usually pays out set amounts if you are diagnosed with certain life-threatening illnesses. This is not generally necessary. If you have a comprehensive health plan, it will cover your cancer treatments. If you are thinking about getting critical illness coverage, make sure you know what financial gap you are trying to cover beyond your healthcare policy.

Long-Term Care Insurance

Long-term care (LTC) insurance can be a good choice for some people. It helps pay for nursing home care (some policies also pay for some in-home care) if you become unable to take care of yourself. Whether LTC insurance is wise depends on your anticipated financial situation in your older years. Again, companies make money on LTC policies, so you don’t want to overbuy.

If you intend to have “a lot” of money in your “old age”, you may want to self-insure for your LTC. Self-insuring means you don’t pay a company but, rather, save the money yourself by building wealth. There are many advantages to building wealth in order to self-insure. One important advantage is that the same nest egg could protect you against many different negative financial events, and, if you never go into a nursing home, the wealth you have accumulated can be passed to your heirs.

So Who Should Purchase It?

Well, those who have a more “average” nest-egg in retirement are likely in the “sweet-spot” for LTC coverage. This is especially true if you are married. Let’s look at some numbers:

According to Vanguard, the average family savings at retirement age is $210,000.

The average annual cost for nursing home care is about $100,000 per year, according to Genworth.

According to Senior Services of America, the average stay in a nursing home is one to two years.

Looking at these numbers, it is clear that if one spouse enters nursing home care, paid for from savings, there may not be much savings left for the other spouse to live on for the remainder of their lives. Remember, insurance is about transferring risk. Purchasing an LTC policy if your family is in this group may make a lot of sense.

When Should I Purchase LTC Coverage?

Again, let’s look at the numbers. According to the National Center for Health Statistics, 83% of nursing home residents were over age 65. Premiums are less when you are younger. However, you don’t want to pay insurance premiums when you are highly unlikely to need LTC. As a result, I suggest you look at the pricing for LTC policies starting around age 60.

How can you choose an insurance company for your LTC coverage? According to ConsumersAdvocate.org, the top five providers for LTC insurance include: GoldenCare, LTC ResourceCenters.com, California Long Term Care Insurance Services, Mutual of Omaha, and MassMutual.

Long-Term Disability Coverage

Long-term disability (LTD) coverage will pay you if you are unable to work for a covered reason (usually health or physical impairment). If your family relies on your income to pay the bills, you need long-term disability insurance. And the good news is that for most people, this insurance is very affordable. In this section, I am talking about a private LTD plan, not Social Security/Disability.

Many employers provide short-term disability that will pays if you are unable to work for a few days or weeks. If you are unable to work beyond that period of time, many companies will keep your job for you under the Family and Medical Leave Act (FMLA) for up to 12 weeks in a 12-month period for a covered event. However, FMLA does not replace your income – it is unpaid leave. This is where LTD insurance fits into your financial plan. LTD insurance will pay you benefits until you are able to return to work or you reach full-retirement age.

Factoring The Cost Of Long-Term Disability Policies

The price of LTD insurance is driven by a few factors: your job classification, the elimination period, the benefit amount, and the occupation choice. Let’s take these factors one at a time.

Your Job

First, your actual job will have an effect on the cost of LTD insurance. Statistically speaking, many people who receive LTD insurance payments were injured at work, so the dangers inherent to your job are relevant to pricing for this insurance. If you ride a desk, your LTD insurance should be very reasonably priced. If you are a high-rise window washer… not so much!

Elimination Period

A second factor that will influence the premium you will pay for LTD insurance is the elimination period. The elimination period is how long after the disabling event the insurance company will wait before it starts paying you. Usually you can choose a three-month or six-month elimination period. Obviously, a six-month elimination period has lower premiums than a three-month elimination period. So, how do you choose the elimination period? How long can you afford to pay the bills if you are unable to work? I recommend that people/families have a three- to a six-month emergency fund. So, if you have a three-month emergency fund, then a three-month elimination period would be wise. If you have a six-month emergency fund, a six-month elimination period would cost you less.

The Benefits

A third factor driving LTD insurance premiums is the benefit amount. A LTD policy is for a set monthly benefit, for example, $3,000 per month. You should choose a benefit amount that will support your family but not much more. (Again, insurance companies are making money on these policies, so don’t overbuy!) Normally you can only purchase around 60% of your gross monthly earnings, because the insurance company is worried about “moral hazard”. It doesn’t want someone deliberately injuring themselves so they can collect LTD in excess of their normal earnings. (Don’t we all know that guy?) But don’t worry, 60% is probably OK, and here’s why. As long as you pay the premiums with “after-tax” earnings, the monthly insurance payout is not taxed by the IRS. (It may, however, be taxed by your state).

Be aware that if you have LTD as a work benefit, any benefits you receive will likely be taxed by the IRS because you didn’t pay income tax on the premium costs. Some LTD policies offer inflation protection with a COLA (cost of living adjustment). If you choose this option, your benefit will increase each year with inflation. This is probably more important when you are younger, as you could collect the benefits for more years until your retirement age.

The Occupational Option

A fourth factor driving these insurance premiums is your occupational option choice. LTD policies allow you to choose an “any-occupation” option or an “own-occupation” option. These options are as you might expect – for the any-occupation option, you would receive disability benefits if you were unable to work in any job for which you have reasonable training and experience. For the own-occupation options, you would receive disability benefits if you were unable to work in your current job.

My case provides a good example of this difference. I am a CPA, but right now, I am employed as a college professor teaching accounting. If I lost my voice and could no longer teach, under the any-occupation option, the insurance company would expect me to get another job as a CPA where my voice was unnecessary. The own-occupation option is slightly more costly, but leaves you with more control over your future employment choices should you become disabled. Also, consider how specialized your current job or skills are; if you have a very specialized job, paying a premium for the own-occupation option might make sense. I suggest you price the insurance both ways and then decide.

How Do I Get It?

How can you obtain LTD insurance? You may be able to purchase it at work, but if you do, consider two things. First, will the benefits be taxable? If so, take that into account when deciding your benefit amount. Second, is the policy “portable”; should you leave that employer, can you take the LTD insurance with you? And at what cost? Many people find they can purchase LTD insurance through a professional organization. (My LTD insurance is through the American Institute of Certified Public Accountants (AICPA).) Another option is purchasing it on the open market. ConsumersAdvocate.org reviews LTD insurance providers here.

Life insurance

Many people have very strong emotional feelings about life insurance, but I’m going to be very practical as I walk you through this topic. (Do I need to say it again?) Insurance companies make money on life insurance policies. You want to find the “right” amount of coverage to purchase, which may be “none.” Because life insurance is a profitable product for the insurance company, it is not a good way for you to create a legacy for your family. Said more plainly – don’t buy life insurance to leave money to your family – it’s too expensive.

The wise use for life insurance is to replace your income, should you die, for people/children who depend on it for financial stability. If you are single and no one depends on your income to live, you may not need life insurance … yet.

Who Does Need Life Insurance?

There are some exceptions to that statement, though. First, in general, when you die, the things you own will be used to settle the things you owe. If you owe more than the value of your assets, the creditors don’t get paid. Your debt doesn’t “jump over” onto someone else unless they also signed for the debt. One exception is if you have a loan with a co-signor (a car, student loans, etc.). Then, you may want a life insurance policy, equal to the amount of the debt, and payable to the co-signor on your loan. In that way, if you die, they can use the insurance policy to free themselves from the debt.

Another exception is if you owe more than the value of your assets, but you have a particular asset you want to give to someone if you die. For example, you have a piece of valuable family jewelry or inherited family property. In this case, you may want to purchase life insurance to pay off your debts. That way, your assets are not sold to pay your creditors.

Otherwise, life insurance is a good way to replace your income for your family, in the event of your death.

How Much Should The Policy Be For?

The next question should be, “How much life insurance do you need?” I recommend 10 -12 times your annual salary. Why do I suggest that amount? If your loved one received that amount in a lump sum, they could invest it in a well-diversified mutual fund. That mutual fund would earn approximately 7% (the long-run return of the U.S. stock market). Thereby, they would be able to replace your income monthly while not touching the principal.

If you have a stay-at-home role, you still need life insurance. For your spouse to continue working, in the event of your death, someone would have to do all the work you are doing: cooking, cleaning, shopping, raising kids, chauffeuring kids around, etc. Calculate how much your family would need to hire out that work and multiply that amount times 10 or 12 to estimate the life insurance value you need.

Types of Life Insurance

There are many different names for life insurance policies, but there are basically two types: term life insurance and life insurance with a savings component. Term life insurance is “straight-up” insurance, like your car insurance. You pay your premiums and hope you never need to make a claim. You choose the length (term) of your policy based on how long you think you would need it (10, 20, or 30 years are common). This is the type of insurance I recommend. It is pure insurance and has the lowest cost per dollar of benefit.

Life insurance with a savings component has many different names: whole life insurance, variable life insurance, permanent life insurance, universal life, etc. There are various options for this type of policy but it is all structured as part life insurance and part savings. In my experience, the cost of the insurance part of these policies is much higher than the same amount of term life insurance, and the return on the savings part is much lower than you can get at a regular bank. This type of insurance is often promoted as life insurance you can never lose (as long as you pay your premiums) while term life insurance is just that – life insurance for a set period of time, after which, you can be denied renewal for health or other reasons.

When To End Term Life?

However, you shouldn’t need life insurance for your whole life. Once you are out of debt, your kids are grown and gone, you have paid off your house, and you have accumulated some wealth in retirement or outside of retirement, you may no longer need life insurance – you will be self-insured. So, estimate how long that will take – 10 years? 20 years? 30 years? That is the term for which you need life insurance. I challenge you to price term life insurance and whole life insurance for the same amount of coverage. Whole life insurance is likely at least 10 times more expensive! So, buy term life insurance and use the difference to build financial stability and become self-insured years earlier.

How To Get A Policy

How can you obtain term life insurance? You may be able to purchase it at work, but if you do, find out if the policy is “portable”. Should you leave that employer, can you take the life insurance with you? And at what cost? Many people find they can purchase life insurance through a professional organization. (Mine is through the American Institute of Certified Public Accountants (AICPA).) Another option is purchasing it on the open market. ConsumersAdvocate.org reviews providers here.

Accidental Death And Dismemberment Coverage (AD&D)

AD&D coverage is usually an add-on to a life insurance policy that pays a higher amount if you die “by accident” (as defined in the policy). This insurance also provides a set amount of money if you lose a hand, foot, limb, your vision, etc. These policies aren’t bad, but if you have the right amount of life insurance, you don’t need additional proceeds if you die by accident. Also, if you are physically impaired and unable to work, you should have a long-term disability policy to replace your income. So, paying for AD&D is duplicative of life insurance and LTD insurance.

Burial Insurance

These policies are usually small life insurance policies meant to give your family enough money to bury you. They are usually expensive per dollar of benefit but don’t have any required health exam. If you do not have any assets and feel that you would like to have this kind of life insurance policy, make sure it is a TERM life insurance policy.

Travel Insurance/Travel Medical

These are two separate policies. Travel insurance usually reimburses your travel costs if your trip gets canceled, delayed for weather, or if you can’t make the trip for specific covered reasons. Full disclosure: I don’t use travel insurance. If I need to cancel a trip, some/most of the costs can usually be rolled into another trip. Maybe, if I planned a particularly expensive trip, I might purchase travel insurance – but I have not so far.

Travel medical coverage, on the other hand, I have purchased occasionally. For most of us, our regular medical policy does not cover us outside of the country. Travel medical insurance usually covers any medical expenses while you are traveling, including medical air transportation to another country or back to the U.S., if necessary. Depending on where you are traveling to, any medical conditions you may have, and what activities you plan to partake in, travel medical insurance may be a wise choice.

Pet Insurance

But what about your furry friend? Anyone who has had a husky knows that unexpected illness and injuries can happen at ANY time. (We used to have a “What Alaska Ate Today” list for my husky – and I think I paid for the vet’s sports car). Pet insurance works similarly to human health policies and can cover a wide range of medical expenses.

The policies currently available vary significantly. Some cover a well pet visit every year, as well as most emergency costs. Other policies are limited to accidents or severe illness. Some may cover acute conditions, like a foreign body surgery but not chronic conditions, like cancer. A few policies even offer liability coverage in case your pet hurts someone else!

So Do You Need It?

Protecting Your Stuff

Homeowner’s Insurance

If you own a home with a mortgage, your mortgage holder will require you to have homeowner’s insurance because it protects their investment in your house. Even if you don’t have a mortgage on your house, it almost always makes sense to have a homeowner’s policy because the premiums are relatively low cost, and the amount of money at risk – the entire value of your house – is high. Most of us could not financially thrive if we lost the entire value of our house.

Types Of Policies

There are several main types of homeowner’s insurance. HO-1 is a basic policy that covers the cost of the dwelling itself, but nothing else. HO-2 provides broader protection extending the basic coverage to include personal belongings and may include protection against additional named perils. HO-3 is the most common type of homeowner’s policy. It includes coverage for the dwelling, personal belongings, and liability. A HO-4 policy was created for renters. It covers personal property and liability but does not include the dwelling. There are also separate policies for condo owners (HO-6) and mobile homes (HO-7).

The HO-3 policy is the most common, so let’s dig a little deeper there.

First, if you have this policy, the company will financially help you repair or replace the building of your home (and any other structures on your property) in the event of a covered loss such as fire.

Second, this policy provides financial assistance for your personal belongings in the case of a covered loss, such as theft or fire. Interestingly, this policy also covers your personal belongings when they are outside your home – but individual valuable items often require a specific rider (see below).

Third, this policy will financially cover costs resulting from injuries to residents or guests in your home (or on your property); it also provides some financial help if there are related legal actions against you. However, depending on where you live, you may need to purchase specific additional coverage for floods, earthquakes, mudslides, or other specific event.

Using Your Policy

Within your homeowner’s policy, you can choose actual cash value, replacement cost, or extended replacement cost reimbursement. Under actual cash value coverage, the insurer will calculate its payout based on a depreciated value (used item value). Replacement cost coverage means the company will calculate its payout based on the original cost without depreciation. Under extended replacement cost coverage, the company will calculate its payout based on the full cost to repair or replace the building or belongings at their current value, so this type of coverage offers protection against inflation. Premiums will be the highest for the extended replacement cost coverage and the least for the actual cash value coverage.  

Pro tip: Make sure you have an accurate inventory of what is in your house. This doesn’t have to be complicated; once a year, you can tour your house using your phone’s video to make a visual and verbal record of what is in your house. Make sure you keep a copy of the video outside your house.

Factors To Consider

You also need to select the deductible for your homeowner’s policy. The deductible is the amount that you will pay in the event of a covered loss before the insuring company pays the rest. The higher your deductible, the lower your premium, so it may make sense to have the highest deductible you are comfortable with covering from your emergency fund in the event of a loss.

If you have any individual items (or collections) of high value that you want to be covered under your homeowner’s policy, you probably will need to have a rider on your policy for the specific item or collection. It is common to need to provide an appraisal as evidence of the value of the item(s) you want to be covered under a rider. You will pay an additional amount annually for a rider.

The last thing to note about homeowner’s insurance is that these policies do not cover normal repairs and damage to your house, such as a leaky roof. However, it will normally cover if a tree limb damages your roof in a storm. The policy is very specific about what is covered. If you have any questions, make sure to ask your agent.

Renter’s Insurance

Everything discussed above for homeowner’s policies is also true for renter’s insurance, except that the actual building is not covered. Many renters don’t realize that according to law, any property can only be insured by its owner. So, your landlord can insure his building, but not your stuff in his building. Renter’s insurance is very affordable, and many renting circumstances include having shared walls with other tenants, so having a proper amount of coverage is probably good risk management.

Umbrella Insurance

The last type of insurance to talk about in this section is “Umbrella insurance.” Umbrella insurance sits on top of your other policies (i.e., auto and home) and covers you if you are successfully sued for an amount in excess of your other policies. The actual cost of an Umbrella policy is inexpensive for what it covers – about $200 for $1,000,000 in coverage. However, you must have high limits on your underlying coverages, so sometimes you will have to pay more to raise your other policy limits in addition to the cost of the Umbrella policy. Also, while Umbrella coverage is relatively inexpensive, you likely don’t need it until you have amassed some wealth that you want to protect.

Auto Policies

Auto insurance laws are state-specific, so you need to research the coverage laws in your state. I will describe auto insurance more broadly here. In the case of an accident, the insurance company for the driver who caused the accident will pay for the damage to all parties and property. So, who decides who is at fault for the accident? The police who arrive at the scene.

Pro tip: Many highways require that you move drivable vehicles out of the lanes of traffic immediately following an accident. But I’m going to tell you to quickly take pictures of all vehicles and their relative locations before moving them. You know you have your phone – take a quick video! This can protect you later.

Auto insurance policies have several parts: liability, medical payments, collision and comprehensive, and uninsured/underinsured motorists.

If you cause an accident, the liability section of your auto insurance will pay your legal expenses, the medical expenses for whomever you hurt, and repair expenses for whatever you damaged with your car (but not any repairs to your car). This is usually the costliest portion of your premium because it is where the insurance company pays out the most in claims. Most states require some minimum level of coverage. However, you should seriously consider more because you can be sued for damages personally beyond your insurance coverage limits.

Breaking Down Auto Policy Coverage

Your liability coverage will have three numbers, like this: 10/20/5. What this means is that you have $10,000 of coverage for bodily injury for one person, in one accident. You have $20,000 of coverage for total bodily injury for all the people combined from one accident. You have $5,000 of coverage for property damage. The insurance industry recommends 100/300/50; in Pennsylvania, where I live, the state minimums are 15/30/5. Remember, the role of insurance is to transfer financial risk to the insurance company. Once the insurance company pays out the maximum coverage, the victim can personally sue you for any additional expenses incurred. If you had only the Pennsylvania state minimum coverage, anything more than a very minor accident could leave you with a financial disaster. Having proper levels of auto insurance protects you!

Breaking Down Auto Policies: Medical Expenses and Collision Damage

If you cause an accident, the medical payments section of your auto policy will cover your medical bills and those of your injured passengers. For those who live in a “no fault state”, this part pays your medical bills even if the other driver is at fault (check your state’s laws).

If you cause an accident, the collision section will pay for the repairs to your car. The comprehensive section covers physical damage to your car from causes other than an accident, for example, theft, fire, flood, hail, tornado, etc. If you have an older vehicle without a loan, you may choose to forgo purchasing collision insurance. To make that decision, compare the blue book value of your car with the cost of the deductible and the change in the annual premium. Also, consider how you would repair or replace your car if it were damaged in an accident you caused – do you have an emergency fund?

The uninsured/underinsured motorists section of your insurance covers you, your passengers, and your vehicle when an uninsured or underinsured driver causes an accident.

The Cost

Auto insurance can be expensive, so don’t presume you can afford a particular car until you have priced the insurance! If you have the VIN (vehicle identification number), you can get a very accurate insurance quote. The VIN is on a plate on the driver’s side dash near the windshield. If you don’t have the VIN, you should still be able to get an estimate of the insurance cost with the make, model, and year of the car.

Pro tip: You can usually get a discount on both your homeowner’s or renter’s insurance and your auto insurance if you “bundle” them (buy them together) with one insurance company. But always price them separately, just to be sure!

Tips To Lower Your Auto Coverage Premiums

• If you have a solid emergency fund, you can lower the premium by raising the deductible.
• Auto insurance premiums can vary significantly among companies for the same car and driver, so shop around! The fluctuations are even more dramatic if you are in a riskier demographic group (i.e., young, old, history of accidents, moving violations). Remember to shop around your auto policy each year about six weeks before your renewal date.
• Watch your credit score. Many insurance companies charge higher premiums for individuals with poor credit.
• Be careful about letting other people drive your car. If they cause an accident, your insurance will pay, and your premiums will increase.
• Consider carefully before you file a small claim. Filing a small claim may move you into a riskier classification of driver, which can increase your premiums. If you have an emergency fund, it may make sense to pay for the repair rather than filing a small claim. I know it sounds ridiculous to pay for insurance and not use it. However, if filing a small claim results in paying a higher premium, you could end up worse off financially.
• (If you are young) get older. Rates for young adults, particularly males, are among the highest. As you get older, your rates should decrease.

Rental Car Insurance

If you are renting a car, make sure beforehand that you are properly insured while driving that vehicle.

First, check with your auto insurance company. You may have exactly the same coverage (and deductibles) in a rental car as you do in your normal vehicle, and for no additional cost!

If that doesn’t work out, call your credit card company and see if it offers rental car coverage. If it does, make sure to book the reservation and pay for the rental car with THAT card.

The last (and most expensive) option is to purchase rental car insurance from the rental car company. Unless you can afford to write a check to replace the rental car, don’t forego coverage on a rental car. If you rent a car frequently, it may be worthwhile to get a credit card that includes rental car insurance, even if you have to pay an annual fee.

Making sure you have the “right” insurance while not purchasing policies you don’t need can be overwhelming. I hope this deep-dive into all things insurance has made you more confident about what to say “yes” to and what to say “no, thank you” to.

Health Insurance Vocabulary
Premium – Your monthly cost of insurance.Usually employers pay at least a portion of the premium for employee health insurance. 
Co-payment – The amount you must pay for each visit to a doctor or health facility.
Deductible – The amount of expense you must pay before the insurance benefit kicks in.
Coinsurance – A percentage of the total cost of treatment that you must pay.
Network – A group or list of doctors/care providers that have contracted with the insurer to provide services at negotiated rates.
Primary Care Physician – The doctor who is your main “go to.” He or she is usually an internist or a family practitioner