[Q] Cost to Insure All the Things

[cantgrowone]

Hi there. I just plugged numbers into a spreadsheet and realized how much I'm paying to insure everything. It might be too much or just right. I'm hoping to find guidance or at least see that I'm not being bent over.

Here's what we're insuring for $285/month:

• ($120.58) House - $223,000 limit, $167,850 personal property, $1,100 deductible
• ($144.44) 2 Cars Full Coverage, $1,000 deductible (2012 Chevy Cruze, 1990 Nissan 300ZX)
• ($5.16) Engagement Ring
• ($13.33) $1 mil Umbrella

What I'm looking at Adding for ($92.36/month):

• ($27.11) LTD: $70k until 67 y/o with 730 day elimination
• ($65.25) Life for me and DW: $500k each, 20 year term policy

This will bring my monthly insurance premium to $403.98, $4,834.68 per year. This is 3% of our income to insure everything; home, auto, life, LTD, and umbrella.

Maybe I'm crazy, but this sounds like a lot of money.

Everything is under State Farm in Alabama.

Edit: I just realized I didn't have the cost of health, dental, and eye care. That comes out of DWs paycheck so we hardly notice until open enrollment comes around.

[GizmoTX]

Do you have dependents? If not, you could skip the term life insurance because you're both employed, unless you have a lot of debt. We ended up never buying life insurance, because we were FI before DS came along. Catastrophic health insurance is a must, but we could never justify the cost of dental or vision insurance; even though we see those professionals regularly, it's less than the insurance would be. The rest of your insurance (house, auto, umbrella, LTD) is also a must because of the size of your potential liability. However, you're spending $160 every year to insure the ring; unless it's really expensive to replace, I'd work on self insuring this.

[cantgrowone]

Thanks for your thoughts. No dependents yet but we are trying for one.

I had the umbrella and ring cost backwards. All this is needed, but I surprised by how much it actually cost. I always just paid it and moved on.

We are almost 30 so won't qualify for catastrophic health insurance. I wish we would have been apart of that the last few years though.

[yachi]

You could raise your house deductible.  It's not something you want to use unless there's damage you can't afford to fix.  Make sure you aren't over-insuring the cars: you want to carry the minimum that your umbrella insurance requires.  Life and disability insurance depend on how close you are to being Financially Independent, and how much coverage you have from Social Security.  In my case my 'stach and social security survivor benefits is enough to replace my income, even though I'm only half-way to FIRE.

[TempusFugit]

I think it is a fine idea to review this budget item and try to do some rational math on the cost/benefit analysis.   Most of us probably neglect to investigate and analyze this category each year.  It is so much less work to just keep paying the policy premiums every year because we tell ourselves that we did the homework on the front end and we don't want to spend that time again. 

Insurance can be a complicated thing, in some measure like your mobile phone bill, in that it is sold and marketed with various line item categories that comprise a policy.  And they sprinkle in these "discounts", much like your cable company, to muddy the waters and make comparisons harder. On top of which, most of use pay our homeowners insurance as part of our monthly mortgage payment, making it a bill with less emotional 'friction', unlike something for which we have to write a check.

Combine that with the math element that involves some degree of probability study, and it is ripe for consumer abuse. 

[AccidentalMiser]

Raise your house deductible.

Don't have full coverage on a 1990 car.

Shop around for different coverage.  Are you possibly eligible to join USAA?

Put the engagement ring in the safe.

I don't hate the idea of life insurance for you, but many companies offer it as an optional benefit for preferred rates. 

Insurance is crazy expensive and is my biggest cost after the mortgage.  It really pays to shop around sometimes.

[boarder42]

life insurance isnt really necessary if you dont have dependents.  and once you have dependents you should look into SSA survivor benefits for this reason we will never carry life insurance.  We'lll have a sizeable stache of around 3/4 of 1MM by the time our first is born plus if either of us pass the other would recieve almost 50k a year with a child til that child turned 16.

[Paul der Krake]

You're not crazy- that is a lot of money.

Don't you have disability/life coverage that can be purchased at work? That's usually much cheaper, or even free.

And yeah, what on earth is up with a $1,100 house deductible. Make that 10k, stat. If you can't afford a 10k deductible, you probably shouldn't be a homeowner.

And boarder42 is right about life insurance. If you are wealthy enough to need an umbrella policy, there's a good chance you don't need it. I just get the minimum free coverage at work.

[SimpleCycle]

Your personal property coverage seems really high.  Ours is around $30k and I think that’d replace most everything.