Two Buckets of Insurance

Insurers spend billions of dollars a year on advertising, and there's a heavy element of 'we have low prices' in much of it. Most consumers shop infrequently with 2 or 3 insurers for home, umbrella and other forms of insurance, find the process painful and don't have a good handle on what it is they are buying or what's the best way to shop. Not shopping for years, or not ever shopping after an initial purchase is quite common.  Let's focus here on the what to buy. In general, we think the decisions about what to buy fall into two distinct buckets: (1) making sure that you are adequately protected if something really bad happens; and (2) saving money by ceasing to buy insurance you don't really need. Good decisions in (2) can fund things that really should be done in (1). Bucket (2) is a little tricky, because if you don't buy coverage and then happen to have a claim that would have been covered, with hindsight, buying the coverage would have worked out better. At the end of the day, it's you that has to make the decision and good insurance agents will document what you decide in part to protect them against an allegation of faulty advice or negligence when one of those hindsight claims actually happens. An example of a bucket (2) item would be buying a low deductible coverage for comprehensive/collision on an auto when you can afford to spend a thousand dollars or more occasionally. For every hundred dollars of premium, an insurance company typically pays out $55 in loss. So if you can self insure a bit more, you'll avoid all that insurance company overhead and in the long run you should come out ahead, with the odd bad year along the way. And it may stiffen your resolve to drive a little more safely and reduce the risk of an accident. Bucket (1) involves things like buying enough liability coverage to protect against getting sued after a bad auto accident, buying umbrella insurance, and making sure that your home is adequately insured if it burns down, and against perils such as flood, wind/hail and earthquake. You'll see plenty of examples when you upload or input your information and generate customized ideas.