Issue #111: Insurance rules everything around me

Hi y’all —

When I was in college, I took a class called “Bugs and People.” I needed to fulfill a science requirement, and I knew it had a reputation for being an easy A. What I didn’t know is how many truly unsettling bug facts I would learn. (I also didn’t know I would have to dress up in a bug costume for a grade, but that’s another story.)

Did you know, for example, that the Food and Drug Administration allows there to be 30 parts of insects in every 100 grams of peanut butter? Or that we have mites that live in our eyebrows and eat our dead skin cells? AND THAT’S JUST FINE?

I didn’t want to know these things; I was perfectly fine living my life blissfully unaware of how many bugs I was encountering IN MY BODY every day. But as soon as I found out, it became something I had to worry about.

I bring this up now because I feel similarly about insurance. Before I worked at Money, I had no idea how many different kinds of insurance there were — or, to be honest, how many risks existed that could financially devastate me. I used to think I just needed health insurance; now I’m worried I don’t have enough insurance to cover everything in my life.

How many types of insurance do I need?

I contacted the Insurance Information Institute’s Mark Friedlander for help. Health care aside, he identified a few key kinds of insurance young adults like me typically purchase (or should at least consider purchasing). I’m going to break his recommendations into three absolute must-haves and three maybe-should-haves.

MUST No. 1: homeowners or renters insurance

Homeowners policies cover people’s houses, garages, sheds and personal items in the event of “a wide variety of perils including fire, theft, windstorm, hail, explosion, vandalism, civil disturbances and other losses,” Friedlander says. Renters insurance — which I have for my New York City apartment — functions along those lines, as well. Both typically include personal liability coverage, which can help with medical bills if someone gets injured on my property, and expenses if my home becomes unlivable due to certain reasons.

Depending on location, I may also want to add on earthquake and/or flood insurance. And I should get on it: Prices for flood insurance through the Federal Emergency Management Agency, or FEMA, are about to go up for most people. 

MUST No. 2: life insurance

Swiftie Scholars will remember that I wrote about life insurance after Taylor released “no body, no crime.” But it’s more than a catchy lyric — it’s a way to financially provide for my loved ones if/when I die.

Life insurance is having a moment because of COVID-19, especially among young adults like me. A study released this past spring found that 48% of millennials are planning to buy life insurance in the next year.

There are two types of life insurance: term, which is for a limited number of years, and whole life, which Friedlander calls “the oldest kind of cash value insurance that combines protection against premature death with a savings account.” Whole life policies are usually much more expensive.

MUST No. 3: car insurance

Most states legally require drivers to have car insurance. Friedlander told me that a standard policy typically includes bodily injury liability (which helps pay for someone else’s medical treatment in the event of an accident), medical payments coverage (which helps pay for my/my passengers’ bills in an accident), and property damage liability coverage (which helps pay for damage to someone’s property). 

It may also have collision coverage (which helps pay for my car repairs in a crash), comprehensive coverage (which helps pay for damage due to theft/vandalism/bad weather), and uninsured/underinsured coverage (which helps pay for medical bills/repairs if I’m in an accident with someone who doesn’t have insurance).

Moving on…

MAYBE No. 1: pet insurance

There’s nothing worse than a sick pet — except maybe the vet bills that come after. Friedlander told me I might want to look into insurance that will help cover the cost of treatment for injuries and illnesses (think: X-rays, prescriptions and the like). Depending on my situation, I may also want to consider pet theft, pet life and/or liability coverage.

That said, Money has concluded that pet insurance really only pays off in the unlikely event my pet gets seriously ill.

MAYBE No. 2: travel insurance

Intended to help soften the blow of financial risks while I’m on vacation, travel insurance can cover everything from the cost of a delayed suitcase to an overseas medical emergency. Friedlander said Cancel for Any Reason policies in particular have become popular during the pandemic, though they cost 40-60% more than standard ones do. If I’m taking an expensive trip, it’s probably worth insuring it to the max given the uncertainties of COVID-19. Alternatively, I can look into the coverage provided for free with certain credit cards.

MAYBE No. 3: device insurance

I’m hopelessly accident-prone, so Friedlander told me to research stand-alone policies that cover my expensive electronics (phone, laptop, et cetera). These can cover water damage, theft and power surges, but they probably won’t cover computer viruses. Here, too, I may want to see if any of my credit cards provide extended coverage for free, like doubling the manufacturer’s warranty. 

THE BOTTOM LINE

(but please don't tell me you scrolled past all of my hard work)

I need to nail down a few basic policies — home, life, car — but I could go a step further by adding pet, travel and device insurance. Grace Yung, managing director with Midtown Financial Group in Texas, said that meeting with a financial advisor can help me whittle down my list of options.

She also told me to be judicious. While covering big-ticket items obviously makes the most sense, it is possible to get caught up and over-insure myself with the smaller stuff. 

“You want to ask yourself, am I able to live without it, or am I able to easily replace it?” Yung adds. “In a perfect world, you want to cover everything, but you can't really do that because you're left with nothing afterward.”

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send me cute pictures of your pets, please

VIA TERRY DAVIS

This might not be a pet, but this is my newsletter and I do what I want. A Scholar saw this giraffe in South Africa recently; while he might not have life insurance, he’s certainly got leaf insurance.

Anyway, sorry I told you all those bug facts. But if I had to learn them, so do you.

See you next week.



P.S. Have you ever bought a specific type of insurance, had an accident and been glad you had it? How fast can you solve a Rubik’s cube? Do you know any cool (not scary) bug facts? Send them my way at julia.glum@money.com or tweet @SuperJulia.

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