How I Use Insurance to Shield My Stash


My insurance coverage shields my stash from financial storms.

Insurance shields my stash from financial storms.

I live a comfortable, frugality-without-sacrifice lifestyle for less than $14,000 a year. I have backstopped it with emergency reserves. And my passive income keeps growing my discretionary fund. But all of it could go to hell in a hand basket if some financial catastrophe struck me. And that’s where my five-sided insurance shield comes in.

Health. Home. Auto. Personal liability. Long term care. I have an insurance policy to cover each one. That five-policy shield eats up a whopping 41% of my annual baseline living expenses. (Ouch!) But to me that is a very necessary evil. And much more preferable to the alternative. Here is how this shakes out for me.

Health. We all know that the cost of a serious illness or accident can devastate savings. My dad’s recent four-day hospital stay just for tests resulted in a $32,000 bill. That bill went to his insurance company. For $2352 a year in premiums, so would mine.

Home. According to my insurance company, it would cost $210,000 to rebuild our house. My half share of that would wipe out over a third of my entire stash! Even without a mortgage lender to require it, this insurance would still be a definite choice for me. And for $366 a year in premiums, you can bet I have chosen it.

Long term care. Even at a modest nursing home, a stay there would gobble up $5000 a month, which is $60,000 a year. Live long enough and you will need nursing care, either at home or at a facility. I choose to bet that I will live long enough to need that care. If and when I do, I do not want to end up in a Medicaid ward or in bankruptcy. For $2256 a year in premiums for a long term care policy, I am making sure I will not have to.

Auto. It would only take $6000 or less to replace my vehicle. But an accident could leave me open to many more thousands of dollars in liability for what may have happened to other people and vehicles. I am not taking that chance. For $420 a year in premiums, I choose to be fully covered.

Personal liability. One could get sued over anything. Both our home and our auto insurance include $300,000 in liability coverage. But I want my whole stash protected. So for $80 a year in premiums each, we carry a one-million-dollar umbrella liability policy. And ALL my assets are covered.

But not life insurance. With no dependents, neither my wife nor I — whichever survives — would need any more money than we already have. So we do not carry this.

I wish I did not have to spend $5474 a year for all these coverages. But having them shields my stash and gives me peace of mind. And that, to me, is priceless.

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    1. Yea… that’s why I am very committed to paying those health care insurance premiums.

      And here’s a personal experience for-instance for you. I recently had a preventive diagnostic colonoscopy performed. Standard cost (I saw the invoices sent to the insurance company) is between $4000 and $5000 for a procedure that takes less than 2 hours from the time they intake you at the front desk to the time they discharge you. Thankfully, my insurance paid for the whole thing.

    1. Remember that LTC premiums get higher and higher the older and older you start. So, if you’re serious, the sooner you begin looking the better. 😉

    1. I agree that LTC insurance is costly. But that’s because LTC is way expensive! One month of basic LTC expenses would cost me more than TWO YEARS of LTC premiums.

  1. How can your homeowner’s be so low. Our house is covered for probably about $175K and our premiums are over $1,000 a year. We have our auto and home together with the same company – the auto is the best I’ve found last time I checked. I think our deductible on the home is $2500K or $5K, I can’t remember. Thanks

    1. Homeowner insurance rates vary a lot based on location. When we lived in Miami, in a house valued at half our current home, the homeowner’s insurance premium ran over $2000 a year. Hurricanes, you know.

  2. Oh, that makes sense. We live where there are tornadoes.In fact, we had one touch down party in our yard at our old house 12 miles away. At our new house, one touched down, less than a mile away.

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