# How to wisely work with insurance Since insurance is a contract, the same [wisdom for contracts](people-6_contracts.md) applies in insurance. Unless it's the law, insurance never has to be permanent. - Research before starting or ending a policy, and don't add features you don't understand. - Generally, insurance becomes less beneficial and pricier as it gets more complicated. - Weird gimmicks like "return of premium" or "waiver of premium" are often not worth the cost. - Don't permit gaps in coverage by starting policies later than the old policy's end date. Insurance is a significantly complex business model that creates many [hyper-specialized roles](https://gainedin.site/idiot/). - The only qualified person who has *any* idea beyond their small box is the independent agent, but that's only to some degree. - Most people in the insurance industry are imprecise with insurance jargon, so ask for *specific* clarification on any trade-based term you hear, and [record every conversation you make](legal-safety.md). - Nobody in an insurance office is particularly aware of your business and personal needs, though they're often aware of the way they frame in the context of a policy. The best way to save on insurance is to carry a [reputation](image.md) within your [legal fiction](image-modern.md) that implies [safety](safety.md). - The credit score is for banks asking "will you pay off your debts on time?" and the insurance score is for insurance carriers asking "will you stay continuously covered and not file claims?" - Generally, shopping around can save 20-40%, but the most affordable insurance will often include a decrease in quality (and possibly claim payout) when you need to file a claim. - The [project management](mgmt-2_projects.md) triangle still applies, but insurance can instead be between quality, cost, or maintaining known risks. - Make lifestyle decisions that enhance your insurance score: - Good GPA in school or staying in the [educational system](education.md) - Clean driving record - Good [credit score](money-2_debt.md) - Low-mileage vehicle (i.e., don't drive it around much) - [Gym membership](body-3_exercise.md) Only pay insurance premiums with already-[taxed](money-accounting.md) money to ensure claims are *also* after-tax. Aim for as many premium discounts as possible that *don't* cut back on coverage: - Look for group insurance policies through your workplace. - Keep multiple vehicles, people, and insurance policies with one insurer. - A decent insurance agent *might* find ways to split up policies, people, and properties, but it's generally not common for saving money and insurance companies prefer that policies *not* have excluded individuals. - Most extra features are absolutely unnecessary, especially if you don't understand them. - Raise the deductible as high as the [emergency fund](money-3_budget.md) you typically maintain (at least $1,000 if possible). - There are also privacy benefits to a high-deductible arrangement, since small events don't have to be reported. - If you can, make and sign [legal agreements](people-6_contracts.md) with others to settle *without* involving insurance companies. - You can sometimes get a discount for staying with an insurance company for several years. - How and when you pay insurance can provide discounts. - To get an early quote discount, shop about 1-2 months before a policy is up for renewal. - Pay the full premium at the beginning instead of in monthly installments. - If you can't afford it, sign up for automatic payments. Don't cut back on coverages that may legitimately matter: - Carry an adequate amount of liability, and scale it upward as you [gain wealth](money-3_budget.md). - Use special form policies whenever possible to cover extremely atypical events (e.g., meteor shower). - When possible, use combined limits (e.g., blanket limits, CSL) to ensure you're less likely to hit them. - For high-value assets, keep replacement cost valuation if at all possible. - Renter's insurance is *very* cheap and always worth the expense (and often required for many apartments). - If you rent a home that burns down or floods, the owner's insurance will *not* cover you! - The quality of an insurance policy is defined *explicitly* by its covered perils. - Customer service is only secondary to high-quality claim payments, but it can make [the process of claim payments](bureaucracy.md) faster. - *Always* carry coverage for natural disasters common to your area. When insurance *is* the law or part of a [contractual obligation](people-6_contracts.md), pay close attention to what you need and why. - Most contractual requirements for insurance are also tests of financial responsibility. - When a [lienholder](money-2_debt.md) requires insurance on their property, they aren't concerned with your liability, and only that an unfortunate event won't destroy their collateral. - If a rental agreement requires insurance, they're typically concerned with your liability (since they're usually insuring the property you're renting as their policy). - If a business contract requires commercial insurance, they typically want proof you've had it for a set period *before* arranging for that contract. Be explicitly honest with your insurance agent. - Many people will [lie](people-lying.md) on their insurance (including concealment), and that will adversely affect the rate when a reporting bureau finds out, and can lead to nonpayment of a claim. - A claim submitted within a few weeks or months of starting a policy can often show up on the LexisNexis report to generate a *very* adverse [reputation](image.md). Online-only insurance companies are generally pricier because people are more likely to submit fraudulent claims online than directly to an agent. - Agents are also typically aware of the odd discounts with each carrier they work with that you may be eligible for. - Further, an agent can communicate when you *shouldn't* submit a claim, since claims representatives are required by law to always submit a claim when you report an event (since anything else can be legally defined as steering). Occasionally, you may want to insure something your insurance policy doesn't cover. - Either you can add an endorsement to cover it (which may include manual underwriting) or will need a separate insurance policy altogether. Submit claims wisely. - Your insurance rate *will* go up when you submit a claim, but you can always migrate to another carrier after the event (even if the claim wasn't paid yet). - Let them know you have an attorney beforehand with a letter of representation, since you're not supposed to speak with them directly if you do. - Work peaceably with the adjuster, since they're a one-person bureaucratic dictatorship paid to be precise about your claim. They're within a claims department and deal weekly with *dozens* of people in your same situation who are generally hostile. - Expect a week to 3 months for a claim to process into a payout, with *lots* of [bureaucratic](bureaucracy.md) back-and-forth. - Don't throw *anything* away, and send all the required documents at once. If you're interested in a more community-minded form of insurance, consider reciprocals. ## Specific insurances Auto insurance - State minimum liability is acceptable if you're poor, but aim for at *least* 25/50/25 and preferably 100/300/100. - If you have an [older car](autos.md), consider dropping collision coverage. - Uninsured and under-insured motorist (UM/UIM) coverage is *very* affordable, and almost always worth it, since 1 in 6 drivers in the USA don't carry insurance. - If you would rather not get auto insurance, you also have the option to post a bond for the state minimum combined amount or qualify as self-insured. Crime insurance - Any identity theft protection should include *some* type of crime insurance, or it's not worth the expense compared to changing [cyber safety habits](computers-cysec.md). Disability insurance - Disability insurance should replace lost income from a disability (~65% of your current income). - Disability insurance is based on occupation, but doesn't consider age. - Buy it if your profession has risks to disable you too much to do your job. - Don't get policies for <5 years. - Make the elimination period longer (time to begin payouts) to lower your premium. - The best disability insurance will come through the workplace. - It's usually called occupational insurance, and often only available in 2-year terms. Health insurance - The number one cause of bankruptcy in the West is medical bills. - 70% of a person's lifetime medical expenses are in the last year of their life, and 80% in the past 6 months. - At the point of reaching morbidity, additional healthcare is simply delaying the inevitable by a few months. - Since it's too much risk, *never* decrease the maximum pay. - Your healthcare can improve your quality of life, but only after you've [taken care of yourself](body-4_health.md) *without* healthcare providers. - A health insurance company will often wholly reimburse the cost of a gym membership. - Healthcare won't prevent the [inevitable death](hardship-death.md) that we all must face, so [learn to accept what may come after it](religion.md). - If you're healthy and don't expect children, try to bring insurance costs down: - Increase your deductibles, co-payments, and stop-loss. - The health insurance system in the USA is *not* part of 1 unified healthcare system, but instead part of 50+ independent systems on a state-by-state basis. - It's important to know *which* state applies for covering healthcare. Homeowners insurance - If you have a property that's vacant or unoccupied, it makes a *lot* of sense to have a human being present, since that person will naturally act to prevent many losses. - Whether it's in the policy as an endorsement or you're getting it separately, *always* get title insurance (for the rare situation where someone wrongly sold title of the home to you). Long-term care insurance - Health insurance does *not* cover long-term care needs. - Long-term care insurance pays for a nursing home, assisted living facilities, and in-home care. - There's a 69% chance a person will need long-term care. - Medicaid and other government programs are *not* reliable with providing long-term care. - Get long-term care insurance the *day* you turn 60, since it's absolutely critical. Life insurance - Life insurance replaces lost income due to death, and comes in two forms: - Term life insurance - will last for a specified period (e.g., 10 years) - Whole life insurance - lasts all the way to the end of a person's life - Universal life insurance is like whole life insurance, but with more features - Near the end of your life, your life insurance needs should *not* be significant. - Beyond [burial costs](hardship-death.md) and [caring for your spouse](relationships-marriage.md), you won't need it. - Children's life insurance should only serve to cover burial expenses. - Whole life insurance is almost always *much* pricier than term life insurance. - Most people are completely unaware of the details of their life insurance policy. - Whole insurance typically funds a savings plan as well as an insurance product. - The gains on an insurance savings plan are abysmal compared to just about any [investment vehicle](money-investing.md) (including CDs and savings accounts). Travel insurance - If you're ever traveling (especially on a [vacation](fun-vacations.md)), always get travel insurance. - One of the most common features of travel insurance includes trip-cancellation insurance, which will reimburse your trip expenses if you experience a qualified unforeseeable event. - Some insurance allows you to cancel for any reason, but their premiums are often 40-60% more. Dumb insurance to avoid - Credit life insurance and credit disability insurance - pay off the creditors instead of buying insurance against the [debt](money-2_debt.md). - Mortgage life insurance - pay off the mortgage instead of buying insurance against the [debt](money-2_debt.md). - Supplemental health insurance - redundant, since it's covering what health insurance is already supposed to cover. - Accidental death and dismemberment - only covers certain *ways* a person can die. - Prepaid burial policies - burial needs can be covered with a well-funded [emergency fund](money-3_budget.md).