Insurance Tips
- Only buy insurance that protects you from some major event upending your life. This means you avoid buying small insurance policies, like pet insurance, extended warranty insurance on your consumer merchandise and vehicles, cell-phone insurance, credit card insurance, etc.) Your savings is there for the small issues. Don't waste your money on insurance policies that rarely pay off.
- If you are concerned about death and protecting your family, buy term life insurance. Avoid high-priced policies that feed off your fear of death. These would include cancer insurance, disease insurance, mortgage life insurance, flight protection insurance, accidental death insurance, and terrorism insurance (yes, that exists). P.S. In the vast majority of cases, a life insurance payout is tax free upon a death.
- Before buying any life insurance, be sure to identify any free policies at work and your survivor benefits at Social Security if you have children in the home and still going to school. You might very well have $300,000 or more at Social Security that is free if you pay into the system. Before buying more life insurance, clearly identify what you have. Go to socialsecurity.gov to get started.
- Ratchet up your deductibles on all of your insurance policies ($1,000 will do). Only file big claims, as you handle the small one’s yourself (take money out of your emergency account to handle the small things in life). The high deductibles will reduce your yearly premiums, and that means more money in your pocket throughout the year. Use that extra money to pay down debt and/or invest in your future.
- Take emotion out of your decision-making on this critical issue. This is hard, but you must do your best. Salesmen use fear to sell you all kinds of products that you very well may not need. Stay rational and educate yourself on insurance matters from independent teachers, not salesmen. Don’t be sold and that means don't hang out with commission-based salespeople.
- Focus on teachers when learning more about insurance and what you should actually buy vs. stay away from. Eric Tyson and Jane Bryant Quinn are good teachers. Read their books, which are highlighted on this website. They will provide you with sound advice on all of your insurance needs you might need and plenty that you don't need. I trust them and so can you.
- If you have a health savings account, treat it like a retirement account if possible. Have your employer send funds to Fidelity and into their wonderful HSA that charges no fees and will allow you to invest the entire amount in stocks. FZROX would be a lovely option. If your employer will not send money to Fidelity, then roll money out of your crappy HSA and into Fidelity monthly or so.
- Here is how you do it. Pay out of pocket for medical expenses. Keep those receipts in a drawer. Later in life you can pull money out of the HSA penalty free and tax free for medical expenses you incurred years back. This provides you the tax benefit going in and going out, which is awesome! You could look at this account as an early retirement account if you like or not as their is no RMD with the funds.
- Keep an eye on the HSA so there is no cash sitting in there. Keep the funds fulling invested in FZROX or some other low fee stock index fund that fits the makeup of your portfolio. This is a great opportunity if it applies, make good use of it as you turn your HSA into the best retirement account in America!
