Insurance: You Can Hate It, But You Can’t Ignore It

Reuven and Rachel Friedbergs’ brains felt like they were bursting. Notices about open enrollment for health insurance kept arriving, full of fine-print gibberish. They needed to make decisions about expensive coverage but were finding it quite complicated. There was also homeowners insurance and insurance required for Rachel’s small business.

They were tempted to tuck all this paperwork away and hope it all somehow went away. Was that an option?

Complicated and Expensive but Vital

Insurance intersects with almost every aspect of our modern lives, making it both expensive and time-consuming. The purpose of insurance is to prevent a bad situation from becoming unaffordable or even financially catastrophic. Most Americans are covered by five or 10 types of insurance, and these plans need some attention, like it or not. With all that complicated paperwork, it’s easy to overpay for unnecessary protections while leaving yourself unprotected for real needs.

Financial Armor

A good analogy for insurance is the body armor that soldiers wear to battle. The best gun is useless to a soldier injured in a vital organ. But overprotecting the body can slow the soldier down and become counterproductive. Similarly, hefty incomes and assets (“weapons”) won’t help much in the face of major medical bills or liability lawsuits (financial attacks). Being financially vulnerable to significant monetary attack is unwise. Insurance is financial armor, but carrying unnecessary or defective protection gear can be worse than having less but better-fitting coverage.

Here’s a big-picture list of important types of personal insurance armor that are must-haves:

Health Insurance

Virtually everyone needs health coverage, and governments and employers often chip in for some or all of the cost in some form or another. If you are paying for this coverage, shopping around and understanding your policies copays, deductibles etc. may be tedious but can save you a small fortune.

Auto Insurance

Auto insurance to cover the cost of basic medical needs arising from accidents and the repair to a vehicle if you crash into it is legally required for all cars on the road. Covering the driver’s own car from the risk of theft or damage is optional unless it’s leased or financed. Shopping around and selecting the right coverage can help trim these bills, which in New Jersey can easily equal thousands of dollars annually. But over trimming can potentially leave you over exposed. 

Homeowners Insurance

Mortgages require insurance, but either way, who can afford to risk what’s very often a family’s largest asset? Homes are covered for most major damages from fires and storms through a policy that costs a tiny fraction of the value of the home, say $1,000–$5,000.

Personal Property Insurance

Homeowners insurance policies typically also covers the homeowner’s property that is contained within the house. Replacing all the furniture, clothing, appliances, dishes, etc. lost due to a fire would be prohibitively expensive, and for a few extra dollars annually, much or all of it can be covered. It may be helpful to take a video of a home’s contents to prove what can be claimed if need be. 

Special Property Riders

Generally excluded from a standard homeowners (or renters’) policy are some high value items like silver, jewelry, or even shtreimels, and business equipment. Coverage for these items needs to be added to the homeowner’s policy via special “riders.”

Flood Coverage

It’s worth noting that most homeowners policies also exclude floods caused by storms (but do cover floods from burst internal pipes). Separate flood insurance can be a necessity for homes that are within flood zones. Again, risking an asset worth hundreds of thousands of dollars or more isn’t wise, but these policies get really pricey if the risk of flooding is high. 

Renters Insurance

Note the stress above on homeowners’ property. A homeowners policy usually does not cover a tenant’s personal property. Tenants should absolutely get renters insurance to cover their stuff in case of damages. A few-hundred-dollar renters policy can save tenants and landlords a lot of money, grief, and strife.

Liability/Umbrella Insurance

One of the greatest financial risks of modern society is getting sued. Homeowners insurance and auto insurance do include some personal liability insurance, but the maximums (usually $500,000 or less) are way too low for anyone with a good income or significant assets. For a nominal annual cost, “umbrella” liability insurance extends protection above what the other policies include to the millions.

Life Insurance

Fundamentally, this protection insures families from the risk of losing a breadwinner’s income due to premature death. If a spouse and/or kids are counting on an income to live, that income should be insured. This vital coverage is usually quite inexpensive. But sadly, it’s common for people to be sold small life insurance policies loaded with optional bells and whistles instead of the large but simple policies their families truly need.

Disability Insurance

Disability insurance is another form of income-protection coverage, for when an earner chas v’shalom becomes disabled and can’t work. Unfortunately, temporary disability is quite common—more common than premature death, which is why disability insurance isn’t cheap. But it should definitely be considered strongly, as government coverage is quite minimal.

Business Armor is Another Story

It’s vital to remember that personal insurance policies will usually not cover business-related damage or liability. All business owners, including those of home-based businesses, need to do serious homework about the specialty armor required to protect themselves. Another article is required for that.

Help Needed

So, insurance of many kinds is a must. But it is also complicated since each policy is a specific and unique legal agreement that spells out in great detail what’s included under which circumstances. There’s a massive industry of insurance brokers who exist to make it less complicated. Unless someone is a bit of a geek who’s willing to learn an entirely new language and pore over hundreds of pages of numbers and legalese, they need professional help to navigate this vital but confusing minefield.

Become an Educated Consumer

With so many different insurance needs, options, and price points, it’s important to work with trusted and experienced agents. But even with assistance, it’s worthwhile to become at least a semi-educated insurance consumer. This will help you know what to ask and gauge which agents know what they are talking about. Take the time to learn the basics and understand your coverages and costs. While it may be tempting to stick your head in the sand and just sign the documents without understanding them, this will lead to overpaying for unnecessary coverage while leaving gaps in your armor.

Thanks to Shmuli Greenes, CEO of BLUE, a division of Stonebrook Insurance, for his valuable input into this article.

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