Duc…take cover(age)

Before Chris Rock went and found himself canceled, he dropped the perfect description of insurance. Since this is a family friendly website, I’ll leave the cussing out of it. “They should call it ‘in case stuff’. I give the insurance company some money in case stuff happens”. Nailed it! Insurance is for all intents and purposes is payment of a premium in case something happens. You paying for the privilege of being made whole if something happens.

There is a litany of types of insurance. Life, health, renters, auto, pet, long-term care…the list goes on and on. Coverage will save your life. It may not be as dire as “the difference between dying a mattress at home or in a hospital bed” but coverage always helps.

Insurance can be complex and about as exciting as a Love and Hip-Hop rapper’s studio session, so for advice advice, contact your local insurance rep. I’m not going to bog down with a bunch of jargon and lingo. Insurance is not my gig, but I have linked a bunch of good stuff if you just want to dive deeper into the exciting world of coverage. This post will be a high level overview of the four types of insurance everyone should have.

Health insurance

Who needs health insurance? Unscientifically scientifically speaking, I’d venture to say 99.9993% of the population needs it. There are some super healthy folks out there, but your vegan wheatgrass kale smoothie is no match for a broken arm caused by a strategically placed Hot Wheels toy. I won’t hop on my soapbox right now. I will say that if health insurance is within your grasp, PLEASE get it.

Where do you get health insurance? Fifty-six (56) percent of Americans are covered by employer-based insurance. That number jumps to 60% if we include those covered by the military. The remaining 40% is an amalgamation of Medicaid, Medicare, and the Health Insurance Marketplace (brought you in part by the Affordable Care Act).

Non-employer health insurance tends to be expensive or not very comprehensive. I welcome the day where health insurance is affordable and all encompassing.

Life Insurance

Picture this: you are scrolling through your social media. A GoFundMe link pops up. “Our beloved uncle/nephew/play cousin/etc was called to Glory. We need to raise $25k so we can bury him in the most expensive coffin Earl Brown and Sons Funeral Home and Notary offers. He did not have insurance. Every little bit helps”.

Check it. If your nephew is 16 and gets hit and killed. I dig it. Let’s raise some money to take care of business. If your cousin who is of a BIG age dies, then I have questions. Why didn’t he have any life insurance? Not even a burial policy? C’mon son! Get mad and stay mad, but no life insurance after the age of 23 is inexcusable. There are some exceptions which I will discuss later. However, for the hoi polloi, no exceptions. Get a policy!!

What are the types of life insurance? Term and whole life seem to be the ones that come up the most. Put down me down as not a fan of whole life insurance. I’m all on Team Term and let me tell you why.

  • As its name states, term insurance covers you for a specific length of time. Younger folk’s (I despise saying millennials) most financially vulnerable period is going to be from age 25 to 55. This is when they’ll have the most obligations and the most people depending on them and dat sweet sweet paycheck of theirs. Term insurance allows you to lock in a new premium to cover this time. God forbid a 33 year old meets an untimely demise, but if they did, that $500k policy they took out will take out a bit of the sting for their family.
  • Perfect segue into my second point. Term life insurance is much cheaper than whole life. With whole life insurance, you’re not only paying for the insurance but you’re paying for the underlying investment portion. Whole life insurance premiums can easily be 3 – 10x higher than term life.
  • Term life is typically easy to get. While you get better rates for being younger, non smoker, and of a healthy weight, the rest of us can still find very affordable coverage. I’m no underwriter so this is purely anecdotal. At one point in time, I topped the scales at over 300lbs. No mind you, I didn’t have high blood pressure, high cholesterol, diabetes, etc. I did my insurance exam and the company quoted me at over $100/mo!! Fast forward, I dropped a bunch of weight and applied for insurance at another company. I did the same exams with similar results and got a rate that was a fraction of the first quote. Pro-tip: if you have recently lost a bunch of weight, it may behove you not to mention it. Insurance companies have a formula of adding back half of what you lost if the weight loss is recent. YMMV.

How much life insurance do I need? If you’re super financially secure, a SINK (single income no kids), or a financially secure SINK, you may need little to no life insurance. People in this category either have enough money to take care of funeral expenses or no one depending on them for financial support. I think the latter person still could use a policy, but wouldn’t frown too much if they didn’t.

Most experts have three rules of thumb to calculate how much insurance is needed. I tend to find these rules more skewed towards people with children. In case you’re interested, the three are multiply your income by 10, same plus $100k per kiddo, and the last is Debt/Income/Mortgage/Education. Essentially tally up everyone you owe, the total of years of support needed times your current salary, the payoff of your mortgage, and educational costs for kids (or kids you help support).

All these rules are cute and I’m sure work very well. The problem I have with them is that they don’t account for a partner’s earnings and earnings potential as well as any savings/investments a person has in their portfolio. Also, if you (and your partner/spouse/boo thang) are childless, those rules do not apply.

My personal philosophy is get as much insurance that you can comfortably afford. The baseline should be enough to knock out any tangible property debts (think: mortgage/cars) so they can be passed on to others. If you want to be nice, get enough to have a little extra that would put a smile on few folk’s faces.  To my fellow gays: if you’re in a relationship, I recommend making sure your boo is listed as the beneficiary on the policy AND on your will. There have been cases of a 3rd cousin thrice removed trying to come in and finesse riches from their “supposed” loved one’s partner. Protect your neck at all times!

Auto Insurance

Ahh, the one insurance that is required in nearly every state. Folks in New Hampshire and Virginia, you’re safe and you may leave the stage. Well not quite, while insurance is not required in these states, residents are liable for any and all damages caused in an accident. So on second thought, come back and listen to this track.

What kind of car insurance do I need? That depends. If you own your car, you can get by with only liability coverage. Think of this as the barest of minimum. Liability covers damages caused during a covered accident that was your fault. Liability DOES NOT pay for damages to your vehicle or personal injury costs. PERIODT!

If your car is financed/leased, you MUST have comprehensive and/or collision coverage in addition to minimums. Lenders aren’t too fond of letting their investments travel all wily nily unprotected. These coverages provide the ducats to fix your damaged whip.

How much car insurance do I need? Your state’s minimum. If you look at a car insurance quote, you’ll see this expressed in three numbers like xx/xx/xx. Each number represents the minimum. So in Texas, drivers are required to carry 30/60/25. What does that mean?

  • First number, 30, is $30k coverage for bodily injury liability maximum for ONE person.
  • Second number, 60, is $60k coverage for all bodily injuries in per accident (no matter how many people).
  • Last number, 25, is $25k for all property damage for one accident.

As someone who has heard of a lot of insurance capers, I can assure you this ain’t enough. I’ve seen accidents that were at lower speeds than a kiddie tricycle collision and 5 people jumped out like they were dying. Let’s do the math. You’re driving down the road. You got the NAO pumping and right as she hits the note “make it out alive”, you tap the back of Dodge Journey. You know you weren’t going that fast. All of the passengers tumble out of the car claiming everything from stiff necks to ingrown toenail. Knowing how grand America’s healthcare system is those ambulance rides will be $10k easy. Tack on some x-rays, Tylenol, neck braces, and therapy then you’re at $LOLGIRL.

If you don’t have a lot of assets, there isn’t much available for a driver to sue against. In this case, the Journey crew will likely take whatever your insurance offers them.

But…if you have been reading this site and your ducats are in fact in a row *winks at camera*, then all of a sudden you are a target for the Journey crew. After they hit up your insurance for all they can get, next up are your assets. Any ambo chaser worth their weight in salt will get as much of your assets as they can. Up those coverages, fam.

Homeowner’s insurance (or Renter’s insurance)

Virtually every single mortgage company requires homeowner’s insurance. Until the house is paid off, the homeowner’s insurance is baked right into the mortgage payment. Wait let’s take it off the 78 and put it on the 33, a mortgage company won’t even give you a mortgage until they have an insurance binder in hand. It’s that necessary.

What does Homeowner’s Insurance cover?

  • Damage to the interior and exterior of your home – This includes damage due to fire, vandals, hurricanes sans the flooding, lightning, and things of that nature. Flooding and earthquakes are typically not covered and require separate insurance. To my folks in hurricane/flood prone areas, I have 2 words for you: FLOOD INSURANCE!! It’s cheap (relative to homeowner’s policy cost) and super simple to get.
  • Loss or damage to your belongings – Clothes, shoes, tvs, furniture, and MOST other contents are covered if they are destroyed in a covered event. Coverage is usually expressed as a percentage of home coverage. For example, your condo is insured for $200k, and your opted for 50% coverage on your stuff, insurance would cover up to $100k for lost/damaged property
  • Lodging expenses while your house is being repaired or rebuilt – Typically expressed as a daily limit this coverage provides reimbursement for rent, hotels, food and other costs racked up during displacement. It’s a pretty neat coverage that could be extremely valuable in an event.
  • Damages or injuries caused by you or your family – Your next door neighbor comes over to admire your new tv. They ask to go use your restroom. In the midst of them being nosy snooping all through your stuff, they slip and fall. Their wrist is broken and they are crying and snotting all over the decorative hand towels that your girlfriend won’t let you dry your hands on, but you’re covered!

Sounds pretty sweet huh? Well as with most insurance, they find a way to not cover things you’d expect to be covered. A few of these things CAN be covered, they just don’t come standard. Roll that beautiful uncovered bean footage.

  1. Trampolines – NOPE! If you plan on Bankhead bouncing in your backyard, don’t expect your insurance to cover any injuries sustained. Heck, just having a trampoline will make you uninsurable with some companies. Can’t say that I blame them. Trampoline accidents send upwards to 100k people to the ER every year, b.
  2. Flooding – Okay, the insurance companies get real slick on this one. If your house floods due to burst pipes and/or leaky faucets, you’re typically covered. HOWEVER, when water come in from outside the house, it’s likely to not be covered. This is why I absolutely implore homeowners to get the flood insurance. My house is not in a floodplain but I live in a city that is prone to flood. The $300 I pay yearly is worth the peace of mind.
  3. Earthquakes – When the ground’s a-rockin, your standard policy will not come a-knockin. Good news is Earthquake insurance is typically very affordable.
  4. War – Huuh! What is good for? Absolutely nothing to your insurance. Sorry folks, if war breaks out and your house is destroyed, you are out of luck, homie. Now terrorism is considered a criminal act. In a handful of states, your standard policy may cover damages caused by acts of terror.
  5. Aggressive Dog Breeds – Typically dog bites and the like are covered under a standard policy. Insurance companies and their actuary wizardry have come up with a formula to determine “aggressive” breeds. It’s based on the number of dog bites reported by each breed. If you’re a dog owner, best bet is to chat with your insurer.

Insurance is a topic that we could spend days talking about. I’m sure that DIAR will have more content about this subject as we grow. Let’s put this baby to bed. I’ll leave you with a few nuggets I’ve learned along the way about insurance.

  • Get the lowest deductible you can afford. Generally speaking, the higher the deductible, the lower the premium. It’s cute to have a $1500 deductible to save coin, but it ain’t cute if you don’t have $1500 when an accident occurs. I see too many folks riding around with doors and trunks crushed because they cannot afford to get their car fixed.
  • Don’t over insure! Too much coverage is costly. For example, with homeowner’s insurance you already “own” the land. Only cover what it would cost to rebuild your home. Anything else is overkill. Car insurance, as your car ages, change your coverage. No need to over insure an old car.
  • Review your policies yearly. Don’t be afraid to switch companies.
  • Pay for small incidents out of pocket. The other day the yard guy broke my front window. The cost to fix it was less than $500. I could had called and filed a claim, but I figured it would be best to keep them out of my life on this one.

Insurance can be a lot to wrap your head around. What are your thoughts on the industry? Are they crooks? Is it too confusing? Hit that comment box and discuss.