Insurance.
The stuff nobody wants to talk about.
Insurance is the least exciting part of personal finance and the most important thing you can't afford to skip. One uncovered medical event, lawsuit, or disability can wipe out a decade of savings. These four guides cover the four coverage types most people need - what to buy, how much, and where to get it.
Insurance is the least exciting part of personal finance and the most important thing you can't afford to skip. One uncovered medical event, lawsuit, or disability can wipe out a decade of savings. Buy term life if someone depends on your income. Buy disability before you buy more life insurance. Add an umbrella policy once your net worth crosses $100K. Pick a health plan by total expected cost in a bad year, not the monthly premium.
The four coverage types most people need
Most people are simultaneously overinsured on things that don't matter (extended warranties, credit-card fraud insurance, mortgage life insurance) and underinsured on the four that do. Fix that order and you are ahead of nearly everyone.
When each kind applies
Not everyone needs all four at every stage. Here is the honest mapping from life situation to coverage:
| SITUATION | TERM LIFE | DISABILITY | UMBRELLA | HEALTH |
|---|---|---|---|---|
| Single, 22, no dependents | Skip | Employer | Skip | HDHP+HSA |
| Married, no kids, dual income | Optional | Employer | If NW >$100K | HDHP+HSA |
| Married, kids, mortgage | Yes, 10-12x | Individual policy | Yes | Compare PPO |
| Self-employed, high earner | Yes, if dependents | Individual, own-occ | Yes | ACA / HDHP |
| Retired, paid-off house | Let it lapse | N/A | Yes | Medicare |
Term life is time-boxed income replacement. Disability is income replacement while you are alive. Umbrella protects assets from lawsuits. Health protects you from the one event most likely to actually bankrupt you.
The honest order to buy
- Health insurance - never be uninsured, even for a month. One hospital visit can run into six figures.
- Disability - usually the single most mispriced coverage people skip.
- Term life - only if someone else's finances depend on your income.
- Umbrella - once your net worth crosses about $100K.
Buy insurance for things that would ruin you. Skip insurance on things you can comfortably self-insure. Extended warranties on a $400 blender are not in the first category.
- Consumer Reports insurance ratings - consumerreports.org
- NAIC consumer guides - naic.org
- Social Security Administration - Disability statistics - ssa.gov
- Kaiser Family Foundation - Health plan comparisons - kff.org
- Policygenius comparison tools - policygenius.com
Additional insurance types worth knowing about
Covers personal property if stolen or damaged, liability if someone is injured in your home, and temporary housing if your unit becomes uninhabitable. Average cost approximately $15-30/month verify×DON'T TRUST, VERIFYClaim: Average renters insurance premium is approximately $15-30/month.Verify at: NAIC consumer information ↗ · Insurance Information Institute ↗NAIC and III publish annual cost surveys; varies by state and coverage limits..
Many renters assume the landlord's insurance covers their belongings. It does not. Landlord policies cover the building structure only.
Worth buying when: non-refundable trip cost over $3,000, destinations with high medical-evacuation risk, or pre-existing conditions that could cause cancellation. Skip when: bookings are refundable, travel is domestic, or your credit card already provides travel protection (Chase Sapphire Reserve, Amex Platinum, and similar premium cards include trip cancellation and emergency-medical coverage as a benefit).
Average annual premium approximately $600-1,200 for dogs, $300-600 for cats verify×DON'T TRUST, VERIFYClaim: Pet insurance averages ~$600-1,200/yr for dogs.Verify at: NAPHIA State of the Industry Report ↗NAPHIA publishes the industry-wide average; specific breeds and ages vary widely..
Most valuable for: breeds with known health issues; people who would spend significantly on pet medical care. Alternative: self-insure with a dedicated pet emergency fund of $3,000-5,000.
Federal law already limits liability for unauthorized credit-card charges to $50, and most cards waive this entirely under their zero-liability policies verify×DON'T TRUST, VERIFYClaim: Federal law caps unauthorized credit-card liability at $50 (Fair Credit Billing Act).Verify at: Fair Credit Billing Act ↗15 U.S.C. Section 1666i caps liability at $50; major card networks impose zero-liability policies in practice.. The free protections that matter more: a credit freeze at all three bureaus. See How to Freeze Your Credit at All Three Bureaus.
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Last updated 2026-04-14. Not financial advice. Do your own research.
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