When I was in my twenties, I hardly used to think about insurance other than what I needed for my car. Now that I’m in my 30s (though barely), I’ve become very insured. When you’re young and invincible, insurance seems like an after thought. It’s one of my bigger regrets that I didn’t tackle my insurance needs earlier. One word - Disability. But before we get into that, let’s go over all the insurance that I have personally chosen to carry and pay for (and you should too). Each of these could be a topic unto themselves.

Car Insurance
I have the minimum coverage for my 1999 Honda Accord. Given that’s it’s an older car, and I can afford to replace the car if need be, there’s no reason for me to insure the car itself. Mostly I have the insurance to cover the damage that I may do to others. See Personal Umbrella below.

Home Owner’s Insurance
I have a policy on the condo I currently rent out. In addition there’s a policy through the Home Owners Association on the the physical structure beyond the inside of my walls. Given there is very little within the condo walls that is actually mine, the insurance is intended to protect me from basically damage to the walls and appliances. My personal condo insurance is very cheap. However homeowner’s policies depending on your property and location can vary quite a bit. Often times depending on where you live, it’s very difficult to get insurance for prevalent nature disasters such as floods. When buying a home the insurability or lack there of should be a strong consideration.

Rental Insurance
My rental policy insures where I live. I rent an apartment, and have lots of stuff there. I want some type protection for all that stuff hence the policy. In addition like a standard homeowner policies it will cover you for stuff that you wouldn’t think would be covered like lost property while you’re on vacation.  Like a homeowner’s policy, there is liability portion that covers you for injuries to others, i.e. someone slips and falls on your doormat.

Personal Umbrella
The Umbrella policy sits on top of my Auto and Homeowners policies. It’s pure liability insurance, and covers personal liability beyond what is already covered via the Homeowner’s and Auto policies. Why is liability insurance important even if you don’t have lot of assets? Garnished wages. It’s not just about what you have now, but what you might have anytime in the future.

The insurances above are considered Property and Casualty Insurance and are very different from the insurance category below, Health and Life. They are two very different galaxies in the Insurance Universe. I’m not going to talk about Health and Dental because I get those through work.

Life Insurance
Most people know what Life Insurance is, or at least as it’s generally thought about. It’s insurance that pays out some set amount to your beneficiaries at your death, and it even pays for suicide after two years (usually). Term Insurance is what I would recommend to most people is straight life insurance. You die, your beneficiaries get something. In addition to term insurance there are also cash value policies. I personally have a variable life policy. Cash value policies have value even if you don’t die that can be used as estate planning tool and or a retirement plan. I would not recommend a cash value policy to most individuals. Why I got one is a story for another day. Cash value life insurance is complicated, very complicated. Beyond the complexities that Insurance companies themselves introduce, there are numerous tax issues as well. Life insurance is intended for individuals who have others dependent on their income stream or services (that’s why it’s equally important for a stay at home parent to have policy as the main bread winner). If you don’t have dependents, it generally doesn’t make sense to have insurance other than for retirement purposes and to lock in a lower rate.

Disability Insurance
Back to where I started. I have a disability policy which I wish I had gotten a year earlier than I actually got it. I have pinched nerve in my lower back. While I have some pain associated with it, in general it’s a non-issue. It doesn’t affect my work or play. However because I have this pre-existing condition, my insurance will not cover most things related to my back. Had I gotten my policy a year before I actually got it (last year), I would’ve been covered at the same cost. Disability insurance generally will not cover pre-existing diagnosed condition. This is the reason why it a makes sense for someone to lock in a policy as soon as he or she can - don’t be like me. A disability policy not only protects loved ones but protects you as well. A 25 Year old has 44% chance of having an episode of long term disability before the age of 65. Disabilities can in all shapes and forms. Disabilities can be physical and mental - long term depression is a very real disability.