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.
# # #
image courtesy of cuteimage at FreeDigitalPhotos.net