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November 22, 2011

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This is a great summary for those who aren't familiar with how insurance works. It can definitely be a confusing topic that's hard to understand.

Sounds like Hank is a shill for the insurance industry.
Admittedly I'm 77, retired, and pretty wealthy but all I have from the list are an Umbrella policy and Healthcare through my ex employer's group insurance policy.
Two he didn't list are car and homeowner insurance policies. There is such a thing as being "Insurance Poor".

What is umbrella insurance, I don't even know what that is? Looks like I have some homework to do. Why is it so important?

I have most of the other types and I just picked up life insurance since I have a baby on the way.

Neo --

This may help:

http://www.freemoneyfinance.com/2011/01/why-you-need-an-umbrella-insurance-policy.html

@Neo,

An Umbrella is what they call an all inclusive liability policy that covers you against any claims of fault or negligence on your part for you actions or as a result of something that happens on property that you own.

As a landlord I consider it critical and the second most important insurance next to the insurance directly on the property.

I carry a personal umbrella to cover all my non-business assets for up to 2 million dollars and I carry liability insurance in the amount of 1 million dollars as part of the homeowners insurance on each individual property and then I also carry a separate commercial umbrella for another 1 million that protects all the properties in aggregate. So I have 2 million dollars of liability coverage on all my personal assets and 2 million dollars of coverage on each real estate property.

You don't need to have 2 million dollars worth of property to want that much coverage. If you have 1 million dollars of property and 1 million dollars of liability coverage and someone wins a judgement against you for 2 million dollars they will take 1 million from your policy and then take the other 1 million from your assets.

The personal Umbrella is about 200 bucks a year and the commercial one is about 300. That is far cheaper than trying to protect my real estate assets in some other fashion through complicated corporate structures and individual LLC companies on each property or something like that which I know some real estate investors do. That creates an accounting nightmare and I am not convinced it will hold up in court anyway. Piercing the corporate veil is not that hard if you don't do everything perfectly. This is far cheaper and in my opinion far safer. If someone wants to sue me because they injured themselves at my property or for some other crazy reason, I have an insurance company that does not want to pay them and will be happy to go to court to fight them for me. And if they lose in court it will have to be for more than 2 million before I owe anything.

I also agree with Limey that this list is overkill and his comment about being insurance poor is accurate.

For a young working family person the first 6 minus long term care are important. (if not renting then homeowners insurance). As you get older long term care may be worth looking into.

The last 4 are stretching a bit into the absurd. He forgot number 11. Asteroid insurance. At some point, you just don't insure for crazy crap.

Certanly not a list for everyone. I have no kids and my home is payed for. I don't have or need any life insurance. And I'm going to roll the dice on the earthquake insurance also. Sure I'll be upset if my one story home in SW Michigan is damaged in an eartquake. But I really feel the odds are in my favor. Its just to unlikely to happen.

And after buying all this insurance the next thing you will need is food stamps because you are now Insurance poor but well protected.

This is the most comprehensive article about insurance that I've read so far. These are all really the types of coverages that we should be aware about.

I think for the most part this applies to mostly everyone given the situation.

Earthquake and Flood insurance are 2 that standout as 2 years ago I'd never believe we should consider it but after the hurricanes and floods of 2011 -we might have to seriously consider them.

I think for the most part this applies to mostly everyone given the situation.

Earthquake and Flood insurance are 2 that standout as 2 years ago I'd never believe we should consider it but after the hurricanes and floods of 2011 -we might have to seriously consider them.

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