Lazy Man and Money

Five Insurance Tips for Five Insurance Types

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It occurred to me that I don’t write about insurance very much. The main reason is that I think it is very boring. It’s hard to get people excited about insurance.

On the other hand, insurance is very important. Perhaps the fastest way to bankruptcy is to not be adequately insured when something catastrophic happens.

However, insurance isn’t all about saving yourself from these events. Since you have to pay premiums every month, you want to keep these expenses down. With that in mind I decided to come up with 5 insurance tips for 5 insurance types:

  1. Car Insurance – There are two secrets to car insurance. You want to protect yourself, your wallet, and earnings in the event of a big accident. Secondly you want to match the level of car replacement insurance with your car. If you have a clunker, you might not want car replacement at all, because it won’t be worth the deductible. (Yes, I slipped in an extra tip. Don’t tell anyone.)
  2. Renter’s Insurance – I’ll keep this short: Get it. I’m amazed at how many of tenants didn’t have it. It is extremely cheap and covers a lot. Now when I get a new tenant, I have a talk with them about getting it if they don’t have it. I tell them that I want their property to be protected and this is the best way to do it.
  3. Life Insurance – Understand the difference between Term Life and Whole Life. Know what your objective with life insurance is. My wife and I’s plan with life insurance is to help the other financially raise the children. Because of that we got a 20-year term life plan that was relatively cheap. It protects again catastrophe and doesn’t drain our wallet.
  4. Home Owner’s Insurance – With regard to houses, separate the value of the house from the land. Buy appropriate insurance for replacing the cost of the house. This can be significantly less than what you paid for the whole property.
  5. Motorcycle Insurance – I thought I’d have a little fun and include a less popular insurance. I don’t have a motorcycle, so I for this one, I reached out to Gerry Bucke, general manager at Bikesure. He said “Completing a motorcycle rider safety course can save you as much as 15% on your premiums.”

There are many more tips on insurance and this is really just the tip of the iceberg. Maybe it’s enough of a tease to make insurance a little less drab.

Use Terms and Conditions to Prevent Disputes

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If you are like me, you’ve scrolled past thousands of terms and conditions without reading them. If my website’s traffic is any indicator, almost no one cares about the terms and conditions of this site. Nonetheless they are important for several reasons. Here’s one very important reason: my advertisers require that I have one. I have to keep those people happy.

Terms and conditions and all the other digital paperwork are needed because eCommerce transactions are not as simple as walking into the local grocery store and picking up a loaf of bread and a quart of milk. When you go to a store, make a purchase, and walk out of the store, you probably disregarded some terms and conditions without knowing it. For example, you might have missed signs stating the refund policy or that the management reserves the right to refuse service to anybody. Those are terms and conditions in real time, and by completing a purchase, you have agreed to them. Last week, I was at Universal Studios in Orlando and I noticed a sign that said that by entering the park, I was granting them a license to use my likeness in their marketing. It made me wonder if a celebrity that endorses Disney can go in. Imagine the can of worms it would open up if Universal put out a commercial involving that celebrity.

Create Your Own Terms and Conditions

When you create your terms and conditions, you could review a dozen sites and “Frankenstein” your own terms and conditions. With any luck, the results will be better than they were for Frankenstein and his monster. At the very least there won’t likely be any torches and pitchforks.

Now there’s a online terms and conditions generator from companies such as Shopify. It would have made my life easier. If I were a small business starting from scratch, I’d start there.

Be Careful with your Terms and Conditions

When a purchase made through a website has more purchasing steps and nearly infinite space for them, the terms are more complicated. In fact, they are complicated enough to trip up large companies like Zappos who had its entire user agreement voided by a federal court. I highly recommend reading that article to avoid their pitfall.

Terms and conditions that are termed “browse wrap” have been thrown out of court, as in the case of Harris v. Blockbuster, for being what the court termed “illusory and unenforceable.”

Cover Your Assets

Terms and conditions such as privacy policies, terms of use, terms of sale, and refund policies are meant to protect the sellers and service providers from losses. By clearly stating what you will and will not do, how you use the customer information entrusted to you, and what policies cover your activities on your website, you are limiting the financial harm that you might experience in a lawsuit brought by a disgruntled customer who feels wronged or injured by your company or the goods or services that you’re selling. In a sense, such documents act like a fence setting out legal boundaries to your liability. They play a part in protecting you from litigation so long as you have fulfilled in good faith all your responsibilities to your customers. Of course, the definition of “good faith” in the case of a merchant transaction is open to interpretation.

Acting in good faith require some effort and transparency. This is why I have a “Quick Non-Legalese Version” section to start my terms of conditions. I want to make sure that I’m transparent. I recommend you do the same.

Quite literally, terms and conditions are cheapest insurance policy you can get. Don’t be “Lazy” and put it off.

Funeral Insurance?

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When I wrote about doubling up on our life insurance last week, a reader emailed me asking about funeral insurance. I had never heard of the term. I figured he was simply talking about life insurance. Then he directed me to visit APIA for funeral plans. I did a little research and it seems like it is better known as burial insurance here. Tomato, tomahto… funeral insurance (or burial insurance) exists… I guess I learn something new every day.

PINNACLE LIFE Funeral Cover

So what’s the difference between funeral and life insurance? I headed to Google to research the two. The biggest difference is probably the most obvious one, funeral insurance is more specialized. Funeral insurance will pay for a funeral, but you life insurance money can be used for anything. Why would you want the more specialized funeral insurance instead life insurance? There’s one main advantage. Often there are no exams, making it easier to get insured. This is key for those who who may be in less than perfect health.

Why wouldn’t you get funeral insurance? It can be much more expensive than life insurance. For that reason alone, it is often worth at least trying to get life insurance first. Also though you may escape the exam, if you disclose a health problem, you can be rejected.

Given my (knock on wood) good health, it seems like I’m doing the right thing sticking with life insurance. That said, my term life insurance is going to expire in 20 years. After that I’ll have to look into funding my funeral from my own savings. If I’m super-rich, I’ll opt to be frozen next to Ted Williams. If it’s good enough for the Splendid Splinter it is good enough for me.

If I’m not super-rich, I’ll probably go the cremation route. It may sound silly, but it’s kind of irked me that if we keep burying people cemeteries will have to continue to expand as long as there’s a human race. Unfortunately we don’t have infinite real estate… so it is unsustainable.

The other reason to go the cremation route is that it is cheaper, which leaves more money around my heirs. It turns out that caskets and headstones are expensive… and I won’t be alive to appreciate it.

Doubling Up Our Life Insurance

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I recently wrote about out how I was looking into disability insurance. In that article, I made a mention that I really should review my life insurance. Why? Because with the birth of our second child our financial obligations have doubled. If either my wife or I died, the other would be left to support both of the children.

Not only that, but we have a few real estate properties. (It still feels odd to write that.) When we have tenants in all of them (and, more importantly, the tenants are happy) everything runs smoothly. However, sometimes tenants move on and we have to replace them with new ones. Then we have to start all over, not knowing what kind of people we are going to get. In the meantime, we still need to make the mortgage payments… at least for the next 15 years until we have them paid off. After that our obligation is reduced to upkeep and taxes, but they aren’t exactly zero. One person working full-time and taking care of the kids has enough to do without having to deal with the hassle of managing multiple properties. Life insurance could cover the cost of a rental management company to ease that burden.

The biggest question is whether to get whole life or term life. Whole life is when you have life insurance for the rest of your life. It can get expensive, because as long as you pay the premiums, they have to pay out the benefit. Term life is life insurance for a specific term. For example, we might get life insurance for 20 years. At that point our children will be close enough to being able to take care of themselves (we hope!), so we don’t need the same coverage to raise them.. I prefer term life. It is cheaper and fits my needs of covering our obligations. Life insurance terms and details can get confusing, so I like the simplicity of term life as well.

When we had our first child, I had to rush to get life insurance. It was one of the last things I had thought about and it hit me – this is not something that I can procrastinate about. I’m not sure if I got the best deal. This time, I can time my own advice: always compare life insurance and perhaps save some money.

I’ll leave you with a final thought about the term life insurance I chose. It is one of the few times that I’m happy to pay for a service that I hope I’ll never benefit from.

Looking into Disability Insurance

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There are circumstances in your life that require obvious change. For example, when we had our first child, it was clear to me that we should increase our life insurance. (Maybe it isn’t as obvious to everyone else and it is just me.) When you buy a car, you have to get insurance in many states. Even people know that at some point they are going to die and need to prepare themselves for that inevitable “change” (not to get all tarot-card-y with the “death equals change” thing).

I can’t think of the circumstance that pushes someone to get disablity insurance… except for when it is too late. When you get your first job they don’t say, “Don’t forget to get disability insurance. When you get a new house, I rarely hear the advice, “Get disability insurance, so you can afford mortgage payments.”

Aside from the Aflack duck, I don’t see a lot of advertisements pushing me to get disability insurance. Maybe I’m not looking hard enough, because it seems to be one of those products you’d see advertised everywhere.

I earn almost 100% of my income at a computer. At first glance, it doesn’t seem to be the type of occupation that requires disability insurance. Even someone with Stephen Hawking’s motor neuron disease could probably physically do what I do with the advances of computers today. However, I am reminded of a colleague, Ben from Money Smart Life who came down with carpal tunnel syndrome a few years ago. While he was able to continue to blog with Dragon NaturallySpeaking software, I imagine it wasn’t easy.

Ben and I have it fairly easy being bloggers. Just about every other job under the sun is more physically demanding, all the more reason for people to have good disability insurance.

Michelin has the great tagline that “so much is riding on your tires”, but if you stop to think about it, just about as much is riding on your income. If you go with GoodYear or Firestone instead of Michelin tires, you still have something reliable, but how many of us are operating our financial vehicle without anything?

One reader recently emailed me suggesting that I find out more about Suncorp Income Protection, but that seems to be an Australian-based company and probably not a great fit for me in the United States.

While I am at it, I should take stock of our life insurance now that we have a second child.