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?

Not Waiting to be Rich

Posted by Robert on November 8, 2010

This is a guest post by Robert, who lives in Calgary and works as a financial adviser. He is married, has three kids and plans to retire at age 35.  Robert and his wife then plan to return to school and become teachers, eventually living and working overseas.

The lottery has been in the news lately. In BC, a couple just won $50 million. If you are between 30 and 40 years old, that’s $1 million per year for the rest of your life. That’s a lot of money. What would you do with that much money? I can assume that most of us would squirrel away a large portion of it. And since the topic is early retirement, I suppose that most of us would quit work and do all the things we’ve been planning for later, once we are financially independent. But let’s take this thought experiment a step further. What will your life look like once you are financially independent?

I enjoy reading and writing. My wife enjoys reading and horseback riding. We both feel strongly about public education and want to improve the education system here. Now look back over that list. Which of those things takes money to achieve? I have realized that my ideal life takes some money, but much of it takes a commitment of time. What’s stopping me from doing some of these things now? I feel that it would be unfortunate to postpone all my happiness to a time in the future. So besides the time I spend working or parenting my kids, I try to spend some time every week doing the things that are important to me. I read and write, I go horseback riding with my wife and we are trying to be involved in local groups that support public education. I’m not able to spend quite as much time as I’d like on these projects, but I my life feels more meaningful than when I focus entirely on work and waste the rest of my time.

I’m not saying I don’t need money to be happy. But once the needs of my family are met, other aspects of my life take on more importance. A wonderful example of people who have found meaning outside of money is a couple in Nova Scotia who won $11 million in the lottery. They gave a portion to family members, they kept a small amount for an emergency fund, and they donated the rest to charity. They reasoned that they had all the things they really needed or even wanted and that others could benefit more from the money. Almost everyone would agree that they were rich when they had $11 million. And they are richer now that they’ve given it all away. It takes more than money and owning stuff to really be happy. They must have also been rich before their lottery win, since they were happy with the life they had.

Money doesn’t change people. It just magnifies what we already are. If early retirement is about amassing enough money to be able to retire, it’s equally about figuring out what to do with our life, once we no longer need to work to support ourselves. If we can build the kind of life we want, we can be happy no matter what circumstances we are in. What do you look forward to doing more of in retirement? What do already you do, besides working, that makes your life meaningful?

Contest – Part II

Posted by Tim Stobbs on November 4, 2010

Don’t you love pleasant surprises? I had one of those yesterday when I found out I had miscounted my vacation time off for the year and I had two extra days.  So this morning I slept in because I took the day off so I’m starting a four day weekend. Ya!

Well this is Part II of our 1000 post and 4th birthday contest.  In this round you can win one of two prizes:

1. The RESP Book by Mike Holman.  An excellent read which I will have a review up for next week.
2. A Kobo Wireless eReader. Valued at $150 and comes loaded with 100 classic books.  It’s basically a library in a box.  The winner will also receive an advanced ebook copy of my book, Free at 45, due out in Feb or March 2011.

To win you can enter several different ways:

• Leave a comment on this post with a valid email (1 entry – limit one entry per person on this method)
• Tweet about this contest and include @canadiandream (2 entries – limit one tweet per person on this method)
• Link to this post from your blog and email a copy of the link to candian.dream.free.at.45[at]gmail.com (5 entries – limit one link per blog with this method)

Now the fine print: contest open to residents of North America(for the Kobo, The RESP Book is only for Canadians).  Winners will be selected by a random number generator.  Contest closes on Nov 19, 2010 at midnight EST.

Good luck to everyone!