In this episode: After covering business insurance, Jon Peyton turns to protecting you and your family. He walks through property and casualty coverage, disability, life insurance and health insurance, highlighting the details people most often miss and why every policy deserves a fresh look each year.
Key insights
- Auto, home and umbrella policies work together. Limits set years ago may no longer protect what you have now.
- Match coverage to the asset. An older car may not need collision coverage, while a high-value or collectible car does.
- Compare deductibles. A higher deductible can save premium if you have the cash reserves to cover it.
- Who pays for disability coverage matters: generally, if you pay the premium yourself with after-tax dollars, benefits are tax-free.
- Size life insurance with two goalposts, human life value and capital needs, and land somewhere in between.
Episode timeline
- 0:00 Protecting you, not just the business
- 0:57 Property and casualty, disability, life and health
- 1:35 Long-term care: a separate conversation
- 2:29 Auto limits and coverage choices
- 5:08 Older cars that hold their value
- 6:06 Choosing the right deductible
- 9:39 Home coverage and how rebuild costs are covered
- 11:39 Personal property limits
- 12:44 The umbrella policy
- 15:17 Disability: who pays matters
- 18:04 Own occupation versus any occupation
- 20:12 Life insurance: human life value
- 23:05 The capital needs approach
- 28:30 Health insurance, HSAs and FSAs
The episode in brief
Four areas of personal protection. Jon covers property and casualty (home, auto and umbrella), disability, life and health insurance. Long-term care is important for people as they age, but it depends heavily on age and wealth, so he saves it for another conversation.
Auto: limits, coverage and deductibles. Many people still carry limits they chose 15 years ago, sometimes close to state minimums. With real assets to protect, that may leave you exposed if you’re sued. Match coverage to the car. An old economy car may not justify paying for collision coverage, while an expensive or collectible car does. Ask your agent to quote several deductibles. If raising yours saves only a little, it may not be worth it; if it saves a lot and you have reserves, it might be.
Home and umbrella. Understand how your policy pays to rebuild your home and whether you could be left covering the gap. Check whether your personal property limit is far higher than what you actually own, since that can add cost. An umbrella policy sits on top of your auto and home policies to cover claims that exceed their limits, and it usually requires certain underlying limits. Review all three together each year with a qualified property and casualty agent.
Disability. Statistically, you’re more likely to become disabled for a period of time during your working years than to die during them. Who pays matters: generally, if your employer pays the premium, benefits are taxable; if you pay with after-tax dollars, they’re tax-free. Understand “own occupation” coverage, which pays if you can’t do your specific job, versus “any occupation,” which may not. Also look at inflation riders, benefit periods and waiting periods.
Life insurance: two goalposts. Human life value estimates the income you’d earn until retirement. A 40-year-old earning $100,000 a year with 25 working years left represents about $2.5 million before inflation. The capital needs approach adds up what your family would need: lifestyle, debts, college and retirement for a surviving spouse. Jon uses the familiar 4% guideline as one way to estimate how much capital could support a given income. Your answer usually lands somewhere between the two.
Health insurance. Most people choose among PPO, POS and HMO plans through an employer, with low- or high-deductible options. High-deductible plans can pair with a health savings account (HSA), which rolls over year to year. Flexible spending accounts (FSAs) let you use your full annual election early, but funds you don’t use may be lost. Needs change, so revisit your choice every year.
Key action items
- Pull your auto, home and umbrella declarations pages. Check limits, deductibles and personal property coverage against what you own today.
- Confirm your disability coverage. Find out who pays the premium, how benefits would be taxed, and whether it’s own occupation or any occupation.
- Run both life insurance calculations. Estimate your human life value and your capital needs, then compare them to the coverage you have.
- Review health plan options at enrollment. Weigh premiums, deductibles and HSA or FSA options against your expected needs.
Listen next: Episode 29: How Entrepreneurs Reinvest Into Their Business to Create Value
Tax rules, rates and limits mentioned reflect the law at the time of recording in 2022 and may have changed since.
This episode is educational and isn’t legal, tax, insurance or financial advice. Speak with your own attorney and advisers about your situation.