Who wants insurance? In fact, there were periods of my life where I had only auto insurance, no health, no life, no renters etc. That’s not a good plan but the Lord brought me through those days without significant harm.
Dave Ramsey recommends 7 types of insurance to preserve our debt freedom found in his book: Dave Ramsey’s Complete Guide To Money and taught in Financial Peace University.
- Homeowner’s or Renter’s
- Long-Term Care (if sixty or over)
- Identity Theft
I am still working on completing the list. I bought my first house in the late nineties and I got homeowners insurance-required by my mortgage company. Before that I should have had renter’s insurance but I didn’t know and I believed it cost too much. Renter’s insurance is cheap. Last I checked, you can get it for a hundred or two each year. If the house or apartment you’re renting burns down, your landlord’s insurance covers his stuff-basically the building-not your property. That is what renter’s insurance is for.
Auto insurance was my first purchase because states require it when owning/operating a car. Though simple do some math calculating to get the right deductible etc. Don’t skimp on the liability insurance. Dave recommends a minimum of $500,000. Take into consideration the deductible levels and pricing and your past driving record (remember the past is not a reliable indicator of the future) to determine how often you have wrecked or had some other insurable damage to your car. Do the math and figure out what levels are best.
Health insurance and health care leads many of the news and politics stories of this era. Its expensive to take care of our bodies. I’ve spent most of my professional life with a high deductible plan with a Health Savings Account (HSA). They’re great when you have no or very little health needs or when you have extremely high health costs like massive surgeries, frequent illnesses, or ongoing issues requiring care. High deductible plans don’t work so well in the middle. I really loved the HSA because it let me set aside money each month and year for health needs BEFORE TAXES and allowed me to carry unused balances over to the future. Another great opportunity to prepare for the health challenges of being elderly.
One thing I found recently, was that my income level was low enough that all of my children qualified for medicaid–state sponsored health care. Check the rules in your state if you have kids and see if they qualify. Going away are the days of “or more” on insurance: where “two adults and two or more children” was the highest rate. Our last shopping experience had each of our five children slated at $179.00 per month. Argh!
I’m currently investigating insurance as I transition from employment to entrepreneur and business owner. The main area I’m looking at is shared Christian health care. There are a number of companies out there and it really falls into the model God set up for us. Pull out your Bible and read Acts–they lived, ate, and worked together and cared for everyone. I have to be careful or I’ll go on a long rant. . . I’ll try to leave a short one:
Self claimed Christians in the US give an average of less than 3% to charity. I spent most of my life giving ZERO. The church was designed to help the orphan, the widow, the homeless, and the prisoner. I believed and many still do, that the government is supposed to do that work. WRONG! NOT BIBLICAL! Never since we “separated church and state.” Sure it’s great if the government helps out but it is our job as Christians to assure that the governement does and when there’s a gap the church needs to step in and fill it. It’s our job first.
Back to the 3%, thats millions of dollars. But if every Christian in the US alone gave a 10% tithe as outlined in the Bible, that would be billions. In short, our giving could far exceed the entire US Government’s foreign aid by a couple fold. Sorry for the second book reference but you gotta read this if you want the exact numbers for this giving example. I love this book because it is full of statistics and logic and geeky type stuff. Most givers are moved by the hungry women and children commercials on TV but I’m moved by the raw facts and comparisons in this book.
Was that short? Yes for me.
So basically Christian healthcare programs share the costs of health care. It’s not tax deductible like health insurance but it’s usually a bunch cheaper. Not only are costs shared but so are stories and most importantly prayers. Since it isn’t insuarnce there are membership requirements-simply a high standard of Christian living. We would probably be on a plan but they don’t cover pregnancy or birth unless you’ve been on their plan since before conception. Also they don’t cover pregnancy out of wedlock. This is something to consider if you’re tired of your health care costs.
Long-Term Disability Insurance
The key words here are “Long Term”. Your emergency fund covers anything short term. I don’t like to think about being disabled but you know what I like less? Thinking about being disabled with no income.
In fact, if you are under age thirty-five, you have a one in three chance of becoming disabled for at least six months during the course of your career.
–Dave Ramsey from the “Why Disability” booklet, published by National Underwriter
Look for occupational disability insurance: pays when you are unable to do the job that you were educated or trained to do. Disability insurance pays a portion of your salary. The higher the percent of your salary, the higher the premium. Eventually, if you’re following this plan, the Dave Ramsey plan, you’ll reach “not so” Baby Step 7 and you won’t need disability because your investments will provide for you and for your giving.
Long-Term Care Insurance
I didn’t know there was such a thing until I participated in my first Financial Peace University class. This insurance covers nursing home, assisted living, and in-home care. Looking at the numbers though you don’t need it until you reach 60 years old. Seven out of ten seniors will require some type of long-term care. Do you want to take the chance that long-term care expenses will decimate the inheritance you leave for your children, grandchildren and favorite avenues for God’s work? Big things happen with huge costs and this is the insurance to cover it. The closer to 60 you get it, the cheaper it will be. By this point I pray you have a full emergency fund and a paid house and are working on Baby Step 7. Don’t let a lack of planing interfere with your Baby Step 7: Building Wealth & Give.
Identity Theft Insurance
I thought this was silly because I’m covered by my bank card and my credit cards. Any fraudulent charges are not my responsibility. That sounds great and all but do you know how many hours could get sucked out of your life trying to follow up and clean up all the damage done by a stolen identity? Me neither and I never want to know. The stories I’ve heard suggest 100s of hours of work to get everything set right. This insurance will provide a team to do all the calling and followup to fix your credit while you and I go on with our lives, our families, our business and work. Well worth the investment.
When you die, life insurance replaces your income. That means my wife and kids can grieve losing me while not worrying about home, food, college, cars, etc. If you have family, if you have debt, if you are still building up your investments, YOU NEED LIFE INSURANCE! I recommend 10 times your salary in a term-life policy. The term depends on your family, debt timeline and investment timeline. At a certain point, your investments should provide the passive income you and your family require and that is when the life insurance can end. My needs will change dramatically after the kids leave home. If you’re reading this before you have kids or with toddlers around, you should consider a 20 year policy of, I’ll say it again, TERM-LIFE. Consider things like paying off the house, sending the kids to college and setting up an investment income for your survivors. Also consider children with disabilities. Will they be capable of living on their own or are they going to need support perpetually like a widowed spouse?
So, If you’re making $30,000 per year and will have or already have very little ones, a good starting point is to purchase $300,000 of 20 year term-life insurance. Adjust that accordingly with the size of the mortgage, and the number of college educations you want to help with (don’t pay for all of it–that steals some learning and responsibility from our children).
I am not a licensed insurance professional nor investment professional. I’m just a guy giving my opinion, sharing my experiences, and praying for your debt freedom and financial success. If you want some personalized assistance from me as your Life Champion, lets have a chat: hit the schedule a chat button in the bottom left of the screen or click here.