A Complete Guide To Insurance Protection (What You Need and DON'T Need)

I'm going to imagine a lot of you have thought to yourself yep , I know I need disability insurance , or yep , maybe I do need more term life or homeowners or flood insurance , but it's overwhelming . I don't know what I do need . I don't want to pay for something I don't need . So you get that paralysis analysis and you do nothing .

And that's what a lot of people do . Don't beat yourself up . If that is you Today , I'm going to tell you and really show you a framework so you can go yep , ari , I get it , I need that , or nope , I don't need that . I'm glad I didn't get it .

I don't want any of you , over-insured , paying for anything you don't need , but I also don't want you going . Oh my gosh , there's one cost . If I would have just paid this amount every month , you're telling me , I could have avoided this huge cost over time .

Some people even say , ari , when you talk about investing , that's not sexy , but it's important , I would argue . To me , investing is the fun side of talking about all this planning . I'd say even tax planning really exciting , because no one loves paying taxes . However , insurance oftentimes does not light people up , and I get it .

It's boring until it's not , and so I just want to make sure it's not overwhelming . You guys walk away from this episode going yep , I know what I need to know about insurance Now . I made a post in my YouTube community page and I said insurance is boring until it's not it's overwhelming , though . What should you buy ?

Long term care , commercial umbrella , disability , health , renter security , auto health , home life . It goes on and on and on . Now I received a few interesting comments from you guys . One comment came from Mike , and Mike says I love a home warranty , whether you're a first time homeowner or you're on your 10th .

It saved me thousands on refrigerator repair , ice machine repair , heat pump . He goes yes , the whole thing . I have a brand new one now . Septic pump replacement , the list goes on . 600 to 700 bucks a year has produced one heck of a return , and , mike , it sure does sound like it .

Then someone by the name of DB commented and says there have been several times either my travel , auto or property insurance has refused to pay my claims . Check out how many Floridians like myself have had their claims denied . Personally , I avoid all insurances except when it's clearly necessary .

And so hard to , of course , know when it is necessary , and , in my opinion , this is why there's so much confusion in this space . No one is really clear on how much they do need . They also know that it's important , but it's also not fun to talk about .

So we're going to , in the next 10 minutes , really distill this down so you're going to know exactly what you need to be aware of and what you don't . So we're going to start going through this Now . As I said at the beginning , investing can be sexy . No one loves paying taxes Insurance isn't but it can yield a much greater return .

So I don't want any of you overinsured , but I also don't want you to lack protection . It's easier said than done . Most people , just so you're aware , they go .

Ari , I want to hire you because my current advisor is not doing tax planning , or they are , but they're retiring soon and I want to make sure I have someone in place to help with that and then , when they go through our planning process , I show them how I can help save them on taxes or invest better .

And then I say I need to look at your insurance policies , I need to look at your umbrella , I need to look at life , I need to look at disability . I need to look at everything and more often than not , that's what I find is I don't think it's going to be to . Most of your surprise is that there's oftentimes a lack of protection there .

I have people coming to me and there is no disability insurance by any means in place . Other people they have too much umbrella coverage where they're just matching their net worth , which is not the way you want to do it .

So there's all these different ways and it can save thousands of dollars , both on the front end , if I can say hey , you don't need to pay for this amount of umbrella insurance . Go , invest that for the next 30 years . Look , it's 200,000 bucks . Other people go oh my gosh .

Yep , I see the value in that , but I just have a hard time paying for insurance because I don't know if I'm going to need it . And that's where it comes to reframing . Now , that's my goal today not to change any of your guys' minds right away , but to reframe , and here's what I want you to think through . I'm going to give you a basic example .

You guys know I love examples and then we're going to go through some good stuff I won't necessarily say fun stuff , but good stuff . And here's the good stuff is , when we're going through this . The example I want to give you right off the bat is that people will look at term life insurance and say I think I need it .

And so for those of you that already have term insurance , you know quite well what you're doing is you are paying a very small amount compared to any other insurance out there , like whole life or universal , and if , god forbid anything happens to you , your beneficiaries get these assets and they get them tax free .

So there might be a $500,000 benefit that goes to your partner so that they can invest that and that can be their retirement income source . Maybe it's for children to go through college . You're aware of that . Right now , less people think about the fact that you are getting an amazing return if , god forbid , something happens .

So if you are paying , for example , $650 a year and that's giving you , call it $500,000 in life insurance God forbid something were to occur that's an amazing return , and so very few people look at it that way . However , I want you to hope that you never get that return . This is the one time when you hear insurance .

I want you to hope that you never get that return , and that sounds odd to say because in investing we wanna get a great return . I don't want you to get a great return because it would mean , of course , something tragic occurred , but it's one of those things that we absolutely wanna make sure that , yes , if we need it , it's in place .

But I have clients right now that have term life insurance and they don't need it on paper , meaning their financial plan does not require it .

If something , god forbid , were to occur , they are going to be okay , but they still want it because that return that you might get if something , of course , tragic occurred , it is substantial and few people look at it that way .

The other way that I wanna go through and kind of the good examples , like I said , maybe not sexy today is what are the absolute insurance policies that I'm reviewing for my clients ? So you're aware , number one is that life insurance . This , of course , provides security for your loved ones if something happens .

It can pay for funeral expenses , outstanding debt , living expenses and most people will just look at do I need it , and they don't look at what's the return that I get if something like that occurs .

So something to think about for some of you that , of course , have a higher liquid asset base or higher just net worth in general , going , hey , I don't think I need insurance , not just do you need it . It can oftentimes be actually really good financial instrument if you're thinking through it well . Number two is health insurance For a lot of you .

You're going , ari , I wanna retire early . I've heard the podcast enough . How do I do it Now ? I wrote an e-book and if you haven't downloaded it already it's in the description on everything you need to think through for health insurance for an early retirement . But health insurance , it really depends . Does your employer pay for it ?

Do you want a certain policy ? These types of insurance , like health insurance of any kind , this is one of those that you do not wanna skimp on . The last thing I want especially none of us know , but if something got through , were to happen , I don't want you going .

Oh my God , I've got a chronic illness , a significant condition , and I just didn't pay for that policy , even if it's unlikely . So , as I'm saying all of this , there's a theme that I hope is resonating , which is you are paying for insurance , hoping you never get your money back . I want you to pay every month . Not going well , I wasted it ?

Nope , you used it . You used it because you did not have to go through whatever is that ? Whether it's life meaning , whether it's a passing , whether it's a significant tragic health event , I want you to pay every single month , happy that you didn't have to file a claim for it or quote unquote , get your money's worth .

This is one of those weird kind of reframing techniques , and it goes with auto insurance as well , which is number three . Now , this type of insurance required most states and , of course , it helps pay for damage to your car or to other people's cars if you are involved in an accident . There's homeowners , renters insurance . I evaluate that for my client .

That is really to determine . Okay , regarding any damage , If it's damaged by fire , if it's theft , is it other covered events ? Do you have the protection that you need based on where you are ? And the biggest one is long-term disability . This is the type of insurance that provides income if you are not able to work due to a disability .

Now you might be going already . I'm working right now , but I don't know if I need long-term disability insurance because I only want to work three more years or five more years or ten more years , and for some of you it's nope , I want to work 20 more years . So of course , it depends . It always does . It's frustrating .

I can tell you to listen to any podcast where people talk broadly , because it's like , okay , this is great , but it's not really dialed to my situation . There's a company called BC Brokerage . That's where I go for most of my clients that go . I don't know where to start . I think I need more life insurance , or maybe I need less and I need disability .

Bc Brokerage . They only work with advisors like myself , but that's where I'll often go if I want to say , hey , we need to get some quotes or understand what's needed . If you're looking for property casualty insurance , well , there's a company known as IPCG and that's where I'll often refer clients as well , and so those are just two sources .

It doesn't mean you , of course , have to go to those . You can search online . But whether it's good or bad , how could you know ? You don't do this for a living . Now there's more than just that , but I don't want to overwhelm you guys too much .

I do want to give you a real life example , as we're going through this as well , which is when you're thinking through , okay , what's the type of insurance I do need . I just kind of went through a basic template life insurance , health insurance , auto homeowners , renters , long-term disability . Those are the main ones , some insurances you may not need .

I also want you to think about these , so , if you've thought about them at all , hopefully you'd never have to think about them again . And of course , it's not for everyone . But extended warranties is number one .

These warranties often do not cover as much as you think and they can be expensive , and so for a lot of my clients , they're emailing me all right , should I get this warranty ? Is it worth it ? And more often than not , the answer is no , not all the time .

Credit card insurance this is a type of insurance typically covers your purchases if your credit card is lost or stolen . However , I often don't recommend my clients get this , because your credit card issuer may already offer this coverage and it's just an added fee . That's unnecessary .

Flight insurance this type of insurance typically covers your flight if you are unable to travel , but you need it to be because of a covered event , such a medical emergency , and I had a client that said already I just want to get this insurance for this upcoming flight . I said , great , go get it .

And they got their insurance and then they needed a doctor's note and their doctor was only going to write them a note for about $250 . And because of that they're like all right , it's going to be a positive $50 , but I would have paid $250 and I get $200 back , and so it just wasn't worth what we call the return on hassle .

So , however , once again , when you look at flight insurance , your travel insurance may already offer this coverage as well , and so it's one of these things that , if it helps you sleep better , knowing , hey , if I have to cancel flight , awesome .

But please know it's not this magical flight insurance where , if you just cancel for cancel sake , that you'll be able to get those funds back , and the hassle to get it back Once again , not sure it's worth it . Then pet insurance this type of insurance can be helpful , actually , if your pet needs expensive medical care .

However , it can be expensive and you very well may not need that if your pet is healthy . A few common insurances , just kind of facts good to know about . Of course doesn't mean it's for all of you . But life insurance about 45% of adults have life insurance .

Most people are underinsured in the world , in the country specifically , but most of that come to me are overinsured . Interesting to note .

And so if we were to say , for example , you're paying for term life insurance and you're spending 500 bucks a year and right now you realize that you only need to spend 250 bucks a year to have the coverage you need , excluding returns in this example Well , what if we took that 250 bucks , compounded that for 30 years got 10% growth ?

You can imagine it's gonna do well for you . But most people don't look at it that way and I don't blame them , that's just the advisor in me right there . So I'll let you all call me a nerd right there . I'm okay with that . Now with health insurance . But 92% of adults have health insurance . Most of you get it through your employer .

If not , if you're self-employed . There are strategies here to really optimize your tax picture . So work with a planner , certainly to dial this . In Auto insurance , about 90% of drivers have auto insurance . It is required in most states . And then homeowners , renters about 70% have this Insurance . Once again , often not needed . That I just went through .

This might surprise you , but about 20% of consumers . They do have extended warranties but , like I said , they don't cover as most people need Credit card insurance . About 10% of consumers have this . I don't love this . I would rather , over credit card insurance , that you get identity protection theft .

I know a lot of people use Xanderans , which is through Dave Ramsey , and , whether you like Dave Ramsey or not , a lot of people just like that service . So that's Z-A-N-D-E-R-I-N-S Xanderans . So identity theft protection . That , to me , is a return on hassle protection where , if God forbid , someone does steal your identity , they will fight for you .

So it's just less hassle on your end . I can tell you right now that I use it . However , it's been a little cumbersome only in the fact that I get a lot of emails of which I find a lot are not applicable or needed , and so there's that danger of do I unsubscribe and then miss the important email .

I find that I actually just put it in a certain folder and then if I do notice something's come up or I get a certain email , I have it flagged for me . But that's just a system I have on my end . Flight insurance only about 5% actually have this , and then pet insurance about 2% . Of course , when I go through all of this , you're going .

Okay , ari , this is helpful , but once again , high level . Yes , it's high level . I don't wanna overwhelm you too much , but I also want you to walk away with going . Okay , ari , this is great . What do I do about this ? The first thing I want you to do is ask yourself how much longer are you gonna keep working ? Is long-term disability needed ?

Because if something happens to you , and even if your spouse is working , you're gonna need income to come through . And if that doesn't come through , it's not solely the fact that , okay , now income's not coming through for cash flow . But are we gonna be able to save to our Roth IRA ?

Because the projection showed that we need to do that to be able to retire early ? Okay , well , if we were to just not have long-term disability , can we meet our needs through our emergency fund or cash reserves ? Maybe , but where are we gonna live on those in the first few years of an early retirement ?

With an early retirement , all of this is very different . If you were saying I wanna retire at 65 or age 70 , okay , don't worry about health insurance , you're gonna have Medicare . Okay , disability insurance , you're planning to keep working . If something happens , it's gonna be something we need to discuss , but it's not . None of this is near as important .

If you're not interested in an early retirement but most of you are , and I would invite you to at least consider it , not if you don't love your job , but if you're going hey , if something were to happen , I wanna make sure I'm okay . I don't care if you wanna retire early or if you don't .

To me , this is one of those insurances where I'm gonna give you that tough love of absolutely reach out to somebody and with long-term disability , there's not a perfect person . I can tell you right now that I've found where it's . Hey , here's where you wanna go . Bc , broke Ridge that's who I work through . A lot of people like Policy Genius .

I've seen some people they'll use Ameritaz . I've seen a few different ones out there . But it's really tough because you're like do I need this ? How do I know ? Well , once again , it really dials into okay , how much longer do you wanna keep working ? Because if it's two , three more years , do you need it ? Probably not . If it's five years , okay .

Would we be okay if something happened ? Maybe , but does that mean we're not gonna be able to implement some of the other strategies I talk about , like tax planning , where we're living off of some cash or living off of other safe assets , so that we can implement some of the stuff I talk about ? So a lot to this , which I realize .

With auto insurance , it's really tough to know . Okay , how much liability am I covered ? Meaning , is it an okay amount ? I think I have a good policy , but I just don't know . If you go , yep , ari , I want a full episode on auto insurance , a full , deep dive , meaning this is resonating , I'm happy to do it .

So , of course , just shoot me a note and say , ari , yep , I want a full dive auto insurance , full , 10 , 15 minutes . Same thing with life insurance , or how you view long-term disability Today's . A little bit about all of it , because I want you to invite . I'm inviting yourself . Please think about these things .

I realize it's not the sexiest thing ever and I can go more into the weeds and I can go less into the weeds , but I really want to make sure . If you're looking at personal injury , if you're looking at umbrella insurance .

If you're looking at all of this , not just do you need it , there's all these types out there and it overwhelms people and my whole thing . I want to keep it simple . I want you to go yep , I know if I need insurance or if I don't . I've got a homeowner's policy . A lot of you do and you're going .

Okay , ari , but what about if there's a lightning , storm or something gets stolen ? Is that covered by it ? It depends . It depends on the policy . And so , if you reach out to myself , if you want a comprehensive , holistic plan , going is my insurance talking to all the other aspects of my plan .

Of course , that's what I love to do , but it's more than just that Meaning don't hire a planner just for this . Speak with someone that , either in your area or online , that you go yep , this is an insurance specialist to be able to make sure you get the needs met that you need .

Less people that I find very few people should , I say , actually reach out and make sure that they have proper protection . And the reason that this is so important is I just want you sleeping well at night . I think people underestimate how much better you will sleep knowing you will not have to worry if something happens .

So for all of you out there that currently have insurance policies of any of these that we've discussed today , I hope you are going . I want to pay this every month and I hope I never get that return back . So another really weird way of thinking about it , which I fully realized .

If , of course , you are looking for more financial topics regarding earlier time planning , I hope you're going to find out that this has been helpful , and you can always submit a question on my website , earlyretirementpodcastcom , or reach out to myself if you are looking to create a custom strategy . Hope that was helpful and I'll see y'all next week .

Thank you for listening to another episode of the Early Retirement Show . If you have a question that you want answered in a future episode , you can always go to my website , earlyretirementpodcastcom . That's earlyretirementpodcastcom , and you can go ahead and submit a question that I'll look to answer in a future episode . Thank you all for listening .

Please do rate it , review it and share it with someone who you think would benefit from this information . If there's anyone out there that you know , I certainly appreciate it and I will see you all each week . Hey guys , it's me again . Please be smart about this . Nothing in this podcast should be construed as financial , tax or legal advice .

Consult with your tax preparer or financial advisor before taking any action . This podcast is for informational purposes only .