Get you some insurance

Insurance is the greatest bet you can take. For a small amount of money, you bet against bad things happening in the future. Insurance is a must have if you are the breadwinner, not financially independent, and have dependents. Don’t underestimate that bad things can happen and do happen all the time.

For instance, last year I had a friend who was walking on the beach and a wave took him out. He snapped his neck, flew to the states for surgery, and is on long term disability. If he had not had disability insurance his family of 4 would have been screwed. If he had died and did not have life insurance his family would have also been screwed.

So here are the types of insurance everyone should consider buying an why:

Disability insurance

As I said my friend got rocked by a rogue wave. There is both short term and long term disability. Most employers offer both, but you should consider also buying a private policy. These plans can be quite variable. Short term disability insurance typically covers between 1 to 3 months of a portion of your salary. Long term disability covers your salary once short term disability is gone.

Pay attention to what portion of your salary the disability insurance pays. For instance mine pays 60% of my income. This money is not taxed and therefore 60% of disability income is actually worth more than 60% of my real income.  

Also pay attention to what qualifies you as disabled. If you are a surgeon, you want a policy that will pay you if you cannot do surgery. Some policies state that if you can do any other job (like see clinic patients or teach), then you are not disabled and they won’t pay. Therefore, the fine print is important. Once again, make sure the policy pays you if you can not do your daily job (i.e. surgery, procedures, etc).

Term life insurance

If you have dependents and are not financially independent then you must have term life insurance to cover funeral expenses and living expenses if you die. Term life insurance typically goes until age 60 or 65 and is relatively cheap. If you are financially independent at age 45 due to great planning, then great you can give up this insurance along with your disability insurance.

For most people term life will be necessary until age 55 or 65. At that point the kids have grown and the retirement income (IRAs, 401Ks and Social Security) begins being tapped.

The amount needed is variable and needs to be determined by annual expenses for a number of years. For instance, as the sole breadwinner a person may need more term life then if their spouse also earns an income.

Basically term life is protecting the family against a tragedy. In our family I am the sole breadwinner currently but I have a term life insurance for my wife as I understand that if she dies I will be devastated and need time off from work to cope and help our son cope. As I am not financially independent and we have a mortgage and my school debt, I have decided the small monthly payment for her term life insurance is worth it. If I die the financial implications are much higher for the family and so my policy is much higher than my wifes.

Auto insurance

A good auto insurance policy is key. Cover the damage done (and mitigate liability) if you crash into someone else and they need medical care, etc. We do not have fancy cars, and therefore our coverage only covers collision and damages to other’s cars and their medical expenses. 

Home insurance

If our house burned down, we would be in trouble. We still owe a mortgage and need insurance to cover the costs of lost items in the house. We did have flood insurance when we lived in New Orleans but have not taken out earthquake insurance while living in Northern California.

Review these additional insurances and take into account where the house is located (literally details such as how high above sea level for flood insurance or is the house sitting on granite for earthquake insurance). Each region has their own recommendations and it should be taken seriously. For instance, the poor people of Baton Rouge who got flooded this year (2016). The majority did not have flood insurance and their home insurance will not cover the damage as discussed here.

Umbrella insurance

For a high income earner or one of high net worth considering a relatively cheap umbrella insurance is a good idea. This insurance sits and waits for something so bad to happen that it eats up your auto or home insurance and still is hungry. Say their is a law suit for 1 million dollars and your auto insurance only covers $500,000 in claims, then the umbrella kicks in to cover the other $500,000. We have a umbrella policy and it only costs a few dollars a month.


That is it. If you obtain the above insurances (plus or minus umbrella) then your families financial future is protected! Simple as that.

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I am a Dad and Doctor trying to find financial freedom by owning my dollars and debts. Helping dads with their finances so they can focus on the family.

10 thoughts on “Get you some insurance

  • April 10, 2017 at 6:55 pm

    What policy did you take out for your wife’s term life?

  • April 9, 2017 at 1:20 pm

    This is a great list of insurances that you need. I am super happy that I have an umbrella policy as it helps me sleep at night. I definitely am not interested in giving up assets that I don’t need to 🙂

    • April 9, 2017 at 9:14 pm

      The umbrella policy is definitely a nice parachute (or umbrella) for those rainy days. I hope none of us will ever need to use it!

  • April 7, 2017 at 3:57 pm

    I’m glad I have auto insurance. A few years ago I got into a pretty big car crash that almost totaled my car. Although I was not at fault, I can imagine how much the other driver’s payments must have gone up after that accident. Don’t think I’d be happy to be in her shoes.

    • April 7, 2017 at 7:02 pm

      Definitely not. One thing I did not mention was that my old auto insurance did not cover other people driving my car. I did not even know this. If my dad had been driving my car and wrecked it, I would have not been covered! So I guess the lesson is to always read the fine print.

  • April 7, 2017 at 2:42 pm

    Nice summary. Of course, it goes without saying that you should purchase only the insurance policies you need, and not to mix insurance with investing, i.e. whole life insurance.

    • April 7, 2017 at 7:01 pm

      Yes. Get the insurance you need. The problem is when people do not. Or they get the cheap insurance that sorely undercover them. Then they wake up one day screwed.

      • April 9, 2017 at 4:39 pm

        Great work. I can relate to your blog as I am physician (anesthesiologist) in California as well, though not yet a dad (some day soon, for sure). Quick question I had was do you think 1 million in umbrella insurance is good enough?


        • April 9, 2017 at 9:16 pm

          I have $1 million as it is relatively cheap. The key is to also have good home owners and auto insurance as these will cover initial costs and hopefully you will never need to pull out your umbrella policy. That being said, all of these are insurances you will always need. Unlike term life and disability insurance which you can get rid of once you are financially independent.


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