Author Topic: Should I buy additional insurance?  (Read 2879 times)

Rein1987

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Should I buy additional insurance?
« on: October 21, 2014, 09:18:38 PM »
A newbie to the insurance world...But my parents told me that I should consider buying some.

Currently, I have car insurance, basic home insurance. Both my husband's and my companies provide 3x salary life insurance and health insurance. If I want to retire early, e.g., in 8 years, should I buy additional insurance? What kind of insurance should I consider?

Something in my mind:
1. additional life insurance. Because I am young (27 years old), maybe I can get a good deal on life insurance. If I succeed in retire after 8 years, I no longer have life insurance from my company.
2. Umbrella insurance. I saw a recent thread discussing this. I'm considering in.
Are there other kinds of insurance that I should consider, like disability insurance? Also, if I retire early, what I should do with health insurance?

My family's current stats:
No children but considering to have one.
net worth around 800k including primary residence.

surfhb

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Re: Should I buy additional insurance?
« Reply #1 on: October 21, 2014, 09:33:53 PM »
You're approaching a sizable net worth so umbrella coverage is smart.   I'd add more life insurance once the kid arrives too

iris lily

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Re: Should I buy additional insurance?
« Reply #2 on: October 21, 2014, 09:44:52 PM »
You're approaching a sizable net worth so umbrella coverage is smart.   I'd add more life insurance once the kid arrives too

This. And of course you need liability insurance on your automobiles.

No life insurance now, there is no reason to have that. I assume that your husband can take care of himself should you die.

I will not comment on disability insurance; some people, even Mustacheans, are very strong about getting that.

If you "retire early" look at the ACA (Obamacare) and see what that gets you. Under current law you are required to carry health insurance that meets the minimum points of ACA. If you will be under the age of 30, you can get by with a high deductible plan.

But at this point I wouldn't worry about health insurance because that landscape will change a lot in just a few years. It will, of course, be a big part of your retirement consideration.

chucklesmcgee

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Re: Should I buy additional insurance?
« Reply #3 on: October 21, 2014, 10:56:14 PM »
Skip the additional life insurance unless you have a kid. Your working husband will easily be able to get by with his job and life insurance policy and $800k networth were something to happen. You really aren't getting "a good deal" getting a policy so young. Insurance is always priced in the insurers' favor no matter what your age. If it's cheaper it's because the odds of them having to pay out are so low. 

Rein1987

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Re: Should I buy additional insurance?
« Reply #4 on: October 21, 2014, 11:18:29 PM »
So umbrella sounds like a perfect plan now. Usually how much umbrella is enough? Is 1m enough?

TN_Steve

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Re: Should I buy additional insurance?
« Reply #5 on: October 22, 2014, 06:42:43 AM »
There was just a long discussion about umbrella coverage, with some pretty informed commentary pro and con: http://forum.mrmoneymustache.com/ask-a-mustachian/umbrella-insurance-yay-or-nay

I am in the pro category for our family, but it depends.  What is your exposure?  Do you or your spouse have jobs that lead to suits (or that make you seem "rich" in the event your tree falls on a kid)?  Do you have rental property?  What state do you live and work in?  What is the homestead exemption? What percentage of assets are outside of retirement accounts?  What is your income trajectory? 

Those same questions impact how much to purchase if you do so.  We had 1 mill for many years, but upped it as our assets  multiplied.  It is relatively cheap, which means: a) hey, why not?; and/or b) the insurers rarely have to make a payment, so why bother?  :-)

As for other insurance, disability can be very important.  (and policies given at work are weak: tend to be low in amount and are taxable income if disabled).  Are either of you in a profession that you could be relatively easily knocked out of the job permanently?  DW is doc in specialty that requires physical dexterity; we obtained "own specialty" disability for her many years ago.  My job doesn't require physical ability, however, so never got it for me.

Not simple questions, sorry!

RetireAbroadAt35

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Re: Should I buy additional insurance?
« Reply #6 on: October 22, 2014, 11:22:56 AM »
My employer offers a personal excess liability policy for $120/year.  I have a copy of the policy documents.  Is it worth it to comparison shop on price/coverage/exclusions?  I'm not sure how much they vary or if it's a good use of time.  I've got a ton of other things to spend attention on at the moment.

Rein1987

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Re: Should I buy additional insurance?
« Reply #7 on: October 22, 2014, 02:49:36 PM »
There was just a long discussion about umbrella coverage, with some pretty informed commentary pro and con: http://forum.mrmoneymustache.com/ask-a-mustachian/umbrella-insurance-yay-or-nay

I am in the pro category for our family, but it depends.  What is your exposure?  Do you or your spouse have jobs that lead to suits (or that make you seem "rich" in the event your tree falls on a kid)?  Do you have rental property?  What state do you live and work in?  What is the homestead exemption? What percentage of assets are outside of retirement accounts?  What is your income trajectory? 

Those same questions impact how much to purchase if you do so.  We had 1 mill for many years, but upped it as our assets  multiplied.  It is relatively cheap, which means: a) hey, why not?; and/or b) the insurers rarely have to make a payment, so why bother?  :-)

As for other insurance, disability can be very important.  (and policies given at work are weak: tend to be low in amount and are taxable income if disabled).  Are either of you in a profession that you could be relatively easily knocked out of the job permanently?  DW is doc in specialty that requires physical dexterity; we obtained "own specialty" disability for her many years ago.  My job doesn't require physical ability, however, so never got it for me.

Not simple questions, sorry!

Thanks for your response. I understand that there are a lot of things to consider, but I do not know what are the main factors to make these insurance decision. We got a quote from our current insurance company roughly $300/year for 1m umbrella insurance. This seems more expensive than others mentioned in this forum. Not a big burden for us, but a little bit worried whether 1m is enough. Quite often to hear about multi-million law-suit in the news.

Both my husband and I are engineers. I guess we do not look rich because we live in a small town house (700sqft), wearing T-shirts and jeans everyday. Because I just started to work last year, and my husband worked overseas for years, we do not have much in retirement account but more in taxable account. Our expense is roughly 30%-50% of our after-tax income. Both income and expense are expected to go up a lot in the next few years when babies come and when I become senior at work. We work and live in CA.

TN_Steve

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Re: Should I buy additional insurance?
« Reply #8 on: October 22, 2014, 03:21:17 PM »
***
We got a quote from our current insurance company roughly $300/year for 1m umbrella insurance. This seems more expensive than others mentioned in this forum. Not a big burden for us, but a little bit worried whether 1m is enough. Quite often to hear about multi-million law-suit in the news.

Both my husband and I are engineers.  ***

Multimillion dollar verdicts upheld on appeal are rare birds against individuals.  You'll read of suits seeking such damages against businesses and the occasional individual, but it is easy to make allegations; far harder to actually win it.  For a pair of normal engineers, it would be akin (maybe first cousin?) to a reverse lottery win.  (assuming no rentals and nothing else out of the ordinary).

$300 sounds like a bit high, but CA is different--and much depends on your locale, as well as what your underlying policies are.   For us, it has been worth it just to know it's there, as we have high wages, "rich" professions, and are saving for a spendy-pants retirement.  Objectively, dunno.  :-)