Monday, November 22, 2010

Have Enough Insurance?

I have to admit, I loathe paying for insurance. I don't like that I am paying for something that I may or may not get something out of. The very idea of it is odd to me, but the reality is that bad things can happen. To anyone. And the easiest way to mitigate your risk is to have insurance. Another thing that really bugs me about the insurance industry is that certain products are given fancy names. I'm not alking about the 'Maulife One Account' or even 'Freedom 55 Account'. I mean life insurance. They are not replacing life. They are replacing income earning ability. It should really be called Income Replacement Insurance.

You need to have auto insurance on your vehicle if you want to drive in Ontario. I get that. You should have some sort of insurance on your home, or if you're renting, at least on the contents, should something happen like being a victim of a break-in, or a water pipe breakage. If you're self-employed, you should have some sort of illness and disability insurance so that you can keep some income coming in, and keep your business afloat if you cannot work for those reasons. All these insurances make good sense from a financial standpoint.

I truly believe the best option is to self insure wherever possible. People should have enough cash reserves at their call to make payments on time if they are unable to work, for whatever reason. I call this my Emergency Essential Expenses account. I am striving to have 10 months worth of expenses in this account, so that all our financial obligations will be met, regardless of my ability to bring in an income.

I can't really self insure with my vehicle, as law requires that I have insurance if I want to continue to drive.

Income replacement insurance, or life insurance if you will, is something that I only have a minimal amount of through B's work. Life insurance is sold as a product that will help you to pay the final expenses and replace the income after the death of a loved one.

My final expenses would be better taken care of in another way, I feel. A pre-paid funeral contract with a funeral service provider is the best way to make sure that my funeral is paid for. There are many benefits to these contracts. I get to choose the products and services I would like for myself, reducing the amazing amount of decisions that need to be made by my family. There are tax advantages as well. Much like a TFSA, you can deposit up to $35,000 in your lifetime into an eligible funeral arrangement, and have the growth accumulate tax-free.

To summarize, I have some life insurance, auto insurance, business insurance, renters insurance, critical illness and disability insurance. Is that enough? I don't know, but it's better than most people I know.

Do you have enough insurance? What types of insurance do you have in place?


  1. We have life, car and critical illness insurance.

    We will have to look into the type of account you speak of.

    For the life insurance I would love to self insure, This would mean that should I die our assets are of a large enough value that my wife and live off the income they produce for the rest of her life. Since I'm the sole source of income.

    I personally don't like how the insurance industry in an effort to make itself look better then a common gambling house blends the lines between insurance and investments.



  2. Wow! You have lots of insurance under your name! I think it’s a good choice to insure yourself with everything that you can possibly get, as long as you can afford them. Anyway, I only have two insurance policies under my name; first is life insurance and second is my car insurance.

    -Hershel Duffey