Insurance You Need and Don't Need

The Wall Street Journal lists insurance you don't need, some you might consider, and policies you must have. The list begins with the types of insurance you can skip and includes the following:

• Pet insurance
• Home warranty
• Extended warranties
• Mobile-phone insurance
• Identity-theft insurance
• Flight insurance
• Wedding insurance

Personally, I don't have any of these (and never had.) I didn't even know some of them existed! I guess you can insure almost anything, huh?

Then they list one you may or may not want/need: travelers insurance.

This is one we struggled with when we went on our cruise. We had a friend whose mother got very sick just before a cruise and they had to cancel the entire trip. Because they had travelers insurance, they got all their money back (they had to send in a doctor's note to prove she was really sick.) We went back and forth trying to decide whether or not we wanted to buy it. There seemed to be a 50-50 split among those we asked -- half advocated getting it and half didn't. In the end we decided against it and everything worked out fine.

Finally they list the types of insurance most people need as follows:

• Medical insurance
• Auto insurance
• Umbrella insurance
• Renters insurance

Ok, I agree with these, but:

• What about disability insurance? You have to protect your #1 financial asset -- your ability to earn money -- right?

 

• What about life insurance? Same as point #1 except covering for death instead of disability.

 

• What about homeowner's insurance? Your house is a HUGE asset. You need to cover it. This applies twice as much to people who are building their own homes. Taking out new build insurance is vital, as it is law in the UK that all new builds have this type of cover”

 

• What about long-term-care insurance? Maybe this should be listed in the middle section of "maybe/maybe not"?

I have medical, auto, homeowner's, disability, life (on both me and my wife), and umbrella insurances. How about you? Do you have more, less, or the same?

Comments

[Jim]

Odd that they'd list renters insurance but not homeowners. Homeowners certainly need homeowners insurance as much or more more than renters need renters insurance.

I agree with FMF that some form of disability and life insurance are certainly good to have too.

I don't think *most* people *need* umbrella insurance. Its not bad to have but for most people it isn't really necessary and should be low on the priority list. $25/month is $300 a year and peoples risk of having $1 million in liability is actually VERY low. We're talking 1 in a million probability. As much as we like watching TV shows about lawyers and complaining about lawsuits the high claim lawsuits are actually very uncommon. For most people the cost versus risk on this one doesn't make it worth while. Not that I think its a bad idea but I just think its not really a 'need' for everyone and there are usually other higher priorities for your money.

On the other hand having higher liability coverage on your auto and/or home policies can be a smart move. The minimum amount of required liability coverage for auto insurance can often be pretty low and won't cover a lot of accidents so increasing that a good idea. Auto accidents are pretty common so a high cost accident can be a real risk. The risk of a major auto accident or fatality are probably 50-100 times as high as being sued for $1M for some other random thing.

[Jenn]

Great article. The list of needs is certainly right on target. With regard to life insurance, placing it on a needs list may depend on whether one has dependents or not.

[Sean @ One Smart Dollar]

I agree how is homeowners insurance not on that list. Come on WSJ

[Julie]

If like most people you have a mortgage, having homeowner's insurance is not a choice -- it's required by the lender. So that may explain why it's not on the list. With regard to life insurance, it only makes sense if you have dependents. Since my husband and I have equal earnings ability and no children, we've never carried life insurance.

[Luis]

I have most on the list, but was turned down for short term disability. I guess I'll wait a year and try again?

[Money Beagle]

I'm pretty much on the same list as you though I do have mobile phone insurance for my wife, because she has a 'knack' for having things happen to her phone where this has proven to be a worthwhile investment.

[WorkSaveLive]

We haven't gotten an umbrella policy but we really need to. I know we need to buy long-term disability insurance but we've slacked on that as well. I guess some of our priorities are out of whack but as soon as they can fit into the budget we will!

We do have life, auto, home-owners, and health insurance.

[George]

I've had mobile phone insurance in the past, but I think the manufacturer's warranty is good enough. (I have an iPhone, and Apple is pretty good about their warranty.)
I don't have pet insurance, because I actually READ the fine print and realized that they basically NEVER pay out. There are literally hundreds of exclusions. I remember Consumer Reports saying that pet insurance isn't worth it too.
I do have a discount card though, it's called "Pet Assure", basically I pay about 7 or 8 dollars per month and I get 25% off at the vet. Coupled with a dedicated savings account, who NEEDS pet insurance?! ;)

[Christina]

I wasted a ton of money on phone insurance. $8 a month for 21 months with no incidents. When my phone died and wouldn't turn back on, I went to file a claim and they said I'd have to pay $100 and they'd send me a refurbished phone. My same exact phone model was selling for $80 with no contract on Sprint's website.

I was paying them $8 a month for the privilege of paying them $20 more to replace my phone when it broke.

[Funny about Money]

I saw that WStJ article and had about the same thoughts about it. Odd they don't include homeowner's...even if you don't have a mortgage, to my mind it's not an option. My house is paid off, but I can't imagine going bare.

After a hailstorm a couple of years ago, the homeowner's kicked in with "catastrophic" coverage -- meaning the claims did not jack up future premiums. The company coughed up over ten grand to reroof the house, replace the air conditioner (which, truth to tell, had been needing replacement for quite some time...), repaint the eaves, and cover a number of smaller repairs.

Now, I have a friend who did not buy any coverage during a period when he lived in an aging condo. When you live in a condo development, often the HOA fees cover insurance on the structure, so all you need is renter's insurance. He didn't even have that, but he didn't own anything of any value except some guns (and you can imagine how happy an insurer would be to cover those!) and a computer. He never had a burglary, flood, or fire, so he got away with it.

Pet insurance, IMHO, is one of the biggest rips going.

[Rudy]

Yes, the most important is life insurance.
it's useless if we have another insurance without life insurance, anything we do is for our life.

[birdgirl]

To put it mildly, we are not fans of insurance. Over the years it has become a dirty word in our house so over the years we have become as self insured as possible.

A policy should really only be purchased to cover those risks/losses you cannot afford to risk/pay yourself. Medical policy is catastrophic only. Auto policy is stripped of many extras. Homeowner policy has a big deductible and appropriate contents amount (a favorite place to inflate coverage).

As a result, we have saved thousands -- thousands that pay the loss when we encounter it, a phenomena people who load up on all kinds of insurance forget.

And should those losses not occur, the money saved is in our pockets, not flushing out some CEO's bank account or paying for the industry's lobbyists who are rigging the game.