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When I needed to buy specialty business insurance, I contacted the approved insurance vendor of a professional organization to which I belonged. With the help of an attorney, I had identified specific risks for which I wanted coverage and this insurance firm seemed like the perfect place to start. The application process was cumbersome and involved some back-and-forth communication but after a few weeks, I received a policy. I carefully reviewed the document, including its footnotes that referred me to the policy's exclusions. Sadly, these exclusions denied coverage for the specific risks that I sought to insure.
I restarted my search, located a firm that offered this insurance (for real!), and purchased a policy. This purchase not only gave me greater peace of mind but also offered nearly twice as much coverage for about one-third the cost of the first policy I considered.
Evaluating insurance requires knowing what you need and matching that need with what's available in the marketplace. For many, this process involves getting expert advice. To help consumers make smart decisions, Tony Steuer, CLU, LA, CPFEE, has written Insurance Made Easy: A Comprehensive Roadmap to the Coverage You Need. His book explains how to evaluate, buy, maintain, and get the most out of your insurance policies.
Overview of Insurance Made Easy
A consumer advocate and insurance professional, Steuer gives readers the big picture about insurance while putting policies under the microscope.
He explains how insurance policies are designed, explores common features and exceptional ones (such as exclusions and special inclusions called riders), and enlightens readers on how to manage your insurance dollar wisely. He discusses not only what types of insurance are available but also covers what's essential, what's desirable, and what's a waste of money for each type.
What You'll Find in Insurance Made Easy
The book contains two main segments: 1) how to develop your game plan for insurance; and 2) how to execute the game plan, which involves buying policies with specific features, coverage amounts, etc., monitoring your policies and your needs, and optimizing your insurance coverage.
The types of insurance covered in this book are:
- health including insurance from marketplace exchanges and Medicare
- life (term and whole)
- long-term care
- annuities (insurance contracts)
There's also a section on specialty insurance for travel, credit, identity theft, and more.
In some cases, you'll find the answers to your insurance questions. In others, you'll discover the questions you need to ask of your insurance agent.
How Insurance Made Easy Can Improve Your Financial Life
Steuer empowers you with the tools to define insurance needs and get proper coverage. He guides you to do the following:
- define uncertain risks to be protected (such as income, property, longevity, etc.)
- quantify the financial exposure (using rule-of-thumb formulas as well as specific calculations)
- identify types of insurance policies available to cover this risk
- determine how the policy coverage and premium fits within your overall game plan
Insurance Made Easy provides you with the tools to make smart decisions at all phases, whether you're looking to get renter's insurance for the first time or whether you're evaluating health insurance for retirement.
Big Lessons from Insurance Made Easy
Steuer positions insurance as a financial tool for protecting wealth, rather than simply urging you to buy as much as possible. Understanding the purpose of insurance first can help you deal with the details later. Here are some of the big picture lessons he provides:
You can avoid being insurance rich and cash poor
Steuer not only cautions readers to avoid being “insurance rich and cash poor,” he also outlines specific steps to achieve this goal. For each type of insurance, he explains the type of coverage that is standard along with what else you should consider when buying a policy.
He guides you in making money-smart decisions based on his experience and understanding of common concerns, including limited budgets. For example, readers learn that the cost of additional liability coverage as a renter or a homeowner is small compared to its value. You'll also learn that investing may be a better way to keep up with inflation, instead of paying for expensive inflation riders.
Many factors affect insurance premiums
There are many factors that affect insurance premiums. These may include:
- gender/age/marital status
- crime levels in your neighborhood
- proximity to a fire station
- eligibility for discounts and discounts taken
- financial health include credit score
- foreign travel
- claims history
The impact of risk factors differs among types of insurance and insurance carriers. For example, your foreign travel may not affect your homeowner's insurance but could impact your life insurance. Further, a medical condition may cause your life insurance rates to be higher with one carrier but not another. Learning what affects your premiums can help you understand your risks and control costs.
You can optimize your insurance
There are many ways to get the most out of your insurance dollar. Steuer's approach involves truly understanding your needs as well as the point of view of the insurance company.
Using the risk factors, for example, you might realize that certain risks (like age) are impossible to change while others (like moving closer to a fire station) are inconvenient to change. However, you can identify and qualify for discounts. You can also shop around for quotes, not simply to find a cut-rate insurer but to find one who doesn't charge you more for certain health conditions, for example.
Another strategy is to scrutinize the structure of the policy in terms of deductibles and coverage amounts. For example, if you buy a home for $400,000 with land valued at $200,000, then you could get homeowner's insurance to cover the home value only rather than insuring the replacement cost of both the home and the land.
Steuer's book shows you how to optimize your results by being thorough in evaluating your specific needs and getting the right coverage amounts.
Examples of Tips from Insurance Made Easy
Steuer delves into topics that I've wondered about but had never yet read a definitive answer. Here are a few of these:
Why you shouldn't admit guilt if you're in an auto accident
I've heard that you should never admit guilt in an accident, ever since I became a licensed driver. But this recommendation has always bothered me because it seems to put money ahead of honesty.
In Insurance Made Easy, Steuer explains that being honest in describing an incident differs from accepting or casting blame. As a driver who may be involved in one or two accidents over a lifetime, you may not be fully aware of all the events that caused an accident. But insurance companies analyze accidents daily. Claims adjusters can recognize patterns of behavior and assign fault in the context of state laws and insurance contracts. So you can relate what happened without blaming yourself or another driver.
Whether your regular insurance covers you in the sharing economy
Driving for a ride-sharing service and renting out extra rooms seem like simple ways to make extra cash. But the typical auto insurance or homeowner's insurance policy doesn't cover you if a paying passenger or guest gets hurt on your property. Sharing corporations may offer insurance but you'll need to review policies to verify coverage.
On the other hand, many policies provide coverage while you're benefiting from the sharing economy as a consumer. For example, homeowner's insurance policies generally cover the homeowner's possessions in a hotel room and an Airbnb rental unless there are exclusions in the policy or rental contract.
How to determine your disability insurance needs
Disability insurance can be expensive so pinpointing the need controls this potential expense. Steuer offers a way to calculate the need as a starting point for purchasing a policy.
- Calculate your monthly expenses (your income may be much higher but generally you'd want to use the policy to keep your household stable, rather than fund discretionary purchases like vacations)
- Determine the monthly amount you want to set aside for retirement on a regular basis (you'd still want to save for retirement even while you're disabled and can't work)
- Consider monthly income from outside sources such as dividend payments or rental property income as you won't need to replace these amounts
Add the first two items and subtract the third to determine the monthly payment you'd like to receive if you became disabled. If a policy cost won't allow you to meet your other financial goals, but you'd still like to get coverage, then you might lower the policy amount or look for discounted rates from a professional organization.
One of the pillars of success in finance is getting protected but not buying too much insurance. If you're like me, I don't simply want to be covered, I want protection against specific risks.
But how do you know where to start? How do you buy insurance? How do you evaluate a policy? How do you know when you're getting a good deal and when you're getting fleeced? How long do you keep insurance? Fortunately, there's a book to answer your questions. Whether you're just starting out or you've been around a while, Insurance Made Easy: A Comprehensive Roadmap to the Coverage You Need by Tony Steuer, CLU, LA, CPFFE can help you.
How do you analyze insurance policies?