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Thursday, March 23, 2017

So Much Insurance!

Posted by Dave on November 9, 2010

This is a guest post by Dave, is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any.  Dave is from Ontario and is working towards his CGA certification.

I don’t particularly enjoy paying for insurance every month (I’m not sure who does).  Yet insurance is an expense that makes up a good portion of my overall monthly expenses.  I use insurance as a means to reduce, and in some cases eliminate catastrophic financial risk in my life.  Most people will have the same or more types of insurance but I thought for this post I would highlight the types of insurance that I have and the reasons that I have them.

Life Insurance:

I have $300,000 in life insurance on myself and my spouse.  We chose this amount after we wrote down our major debts and what we’d need to live for a few years as well as allowing for time if we wished to move to another town. We may only need this insurance for 10 to  15 years, but getting a  similar type of insurance at an older age would be significantly more expensive.    This insurance costs us $45 per month for the two of us.

Car Insurance:

I am the sole driver, and pay $90 per month for car insurance.  Right now, I have minimal coverage having removed comprehensive insurance when I felt I could replace my car with cash.  When we buy a new car in the spring, I would probably re-instate a high-deductible comprehensive policy, as our savings will be significantly depleted for at least a year or two.  There’s not much I can do about this insurance cost, other than try to limit it and keep it low by driving legally and safely.  One reason why I wanted my wife to go to driver’s training was the training aspect – hopefully making her a better driver and perhaps limit the chance of collision and higher insurance rates for us.

Content Insurance for our Condominium:

The nature of a condominium means that we don’t actually own the townhouse structure that we live in.  Our real estate agent described our ownership as “from the drywall in”, which is a simplistic explanation.  This ownership method means that we don’t really need to insure the structure, we just need to insure our “stuff” inside the structure.  For $17/month I get the following:

Personal property – $42,000 (Deductible $1,000)

Loss of use of my unit – $21,000 (No deductible)

Unit improvements and betterments – $42,000 (No deductible)

Personal Liability – $1,000,000

CAA:

I classify this as “car-breakdown” insurance.  For $114 per year, I am insuring myself from what possibly could be a very expensive tow-ride or somewhat dangerous situation.  About twice a month, I drive 500 km (round trip) either to my wife’s family or to one of our friend’s places.  A lot of this drive is on major highways and much of it is somewhat desolate.  The piece of mind that buying this insurance means a lot to me, and for what works out to $9.50 per month is worth it to me.

A couple of months ago, I was at a red light and attempted to put my car in gear, only to find my clutch slamming to the floor – knowing I could call for a tow to a garage meant that the situation wasn’t as tense as it normally would be, it essentially fixes my annual towing cost if I breakdown, leaving only car repairs to worry about.

Other than minor insurance costs associated with health insurance premiums for work, I self-insure everything else I own.  I don’t buy extended warranties on electronics, nor pay for things like phone-replacement insurance from my provider.  By having some savings and looking for used models, it would be fairly cheap to replace pretty much everything in my house, eliminating the need to insure.

So, that’s where my insurance dollar goes.  It seems like a lot of money every month, but if I were to ever need it, I will be very happy to have paid the approximately $160 per month in insurance costs (around 10 to 15% of our monthly expenses).

How do you decide on what types of insurance to get, and how much?  Do you feel over insured?

Comments

2 Responses to “So Much Insurance!”
  1. deegee says:

    You did not include health insurance, but probably because your country (unlike mine, the USA) has a form of natiional health plan.

    I retired 2 years ago at age 45, so I won’t be eligible for Medicare for another 18 years. Until then, I will be paying thousands of dollars each year for an individual HI policy, far more than all my other forms of insurance put together.

    Those other forms include auto and home (I live in a co-op apartment, so I pay for my own inside-apartment coverage as well as a portion of the co-op’s overall insurance policy). I am single and have no kids so I don’t need any life insurance.

    For 2011, my HI policy (excludes dental) will cost me about $700 a month, while the other stuff will cost me about $150 a month (and that includes a recent increase in my auto liability coverage due to being more reliant on my investments for my livelihood). My total monthly expenses are about $1,900 a month.

  2. Hi Dave,

    Your thoughts on life insurance is misplaced but understandable. If you want to pay less taxes have more money in retirement with less risk you may want to re-look at insurance. If you are a numbers person and have an open mind I have a book you can read to start. feel free to drop me a line.

    regards,

    Brian

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