Insurance
Managing risks that money alone cannot cover
Week 50 Day 1: Insurance as Risk Transfer: What It Is and Is Not
Insurance is not an investment. It is a risk transfer tool. You pay a small, predictable cost (the premium) to transfer a large, unpredictable risk (a house fire, a cancer diagnosis, a car accident) to an insurance company. You should insure against catastrophic losses you cannot absorb, and self-insure against small losses you can handle. That is the entire framework.
Read commentary →Week 50 Day 2: Health Insurance: The Biggest Financial Risk in America
Medical debt is the number one cause of personal bankruptcy in the United States. A single hospitalization can cost $50,000-$500,000 or more. Health insurance is not optional -- it is the most critical insurance you carry. Even a high-deductible plan with a $7,000 out-of-pocket maximum protects you from the six-figure bills that destroy financial plans.
Read commentary →Week 50 Day 3: Life Insurance: Replacing Income Your Family Depends On
Life insurance replaces your income if you die while your family depends on it. If no one depends on your income, you do not need life insurance. If your spouse, children, or other dependents would face financial hardship without your paycheck, term life insurance provides the simplest, cheapest solution: a fixed benefit for a fixed period at a fixed premium.
Read commentary →Week 50 Day 4: Disability Insurance: Protecting Your Earning Power
Your ability to earn income is your most valuable financial asset. A 35-year-old earning $75,000 per year will earn over $2 million before retirement. Disability insurance replaces a portion of your income (typically 60-70%) if an illness or injury prevents you from working. One in four workers will experience a disability lasting more than 90 days before reaching retirement age. This risk is far
Read commentary →Week 50 Day 5: Umbrella Insurance: Cheap Protection Against Catastrophic Lawsuits
Your car and homeowners insurance have liability limits -- typically $300,000 to $500,000. If you cause a serious car accident or someone is severely injured on your property, damages can exceed $1 million. An umbrella policy extends your liability coverage to $1-$5 million for approximately $150-$300 per year. For anyone with significant assets to protect, it is the best insurance bargain availab
Read commentary →Week 50 Day 6: Long-Term Care: The Risk Nobody Wants to Think About
Approximately 52% of Americans over 65 will need some form of long-term care -- assisted living, nursing home, or in-home care. The average cost is $55,000-$110,000 per year, and Medicare does not cover it. Long-term care can deplete a retirement portfolio in just a few years. This is the hardest insurance decision you will face because the options are expensive, complex, and emotionally fraught.
Read commentary →Week 50 Day 7: Your Insurance Audit: What to Keep, What to Drop, What to Add
Most people are simultaneously overinsured on small risks (low deductibles, extended warranties, rental car coverage) and underinsured on catastrophic risks (insufficient liability coverage, no umbrella policy, no disability insurance). An annual insurance audit realigns your coverage with the principle that matters: insure catastrophes, self-insure inconveniences.
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