What Insurances should you buy When?

I like being transparent about my financial decisions in life, because I know how much more valuable real-life experience is rather than hypotheticals. Plus, we’re doing pretty well financially on our road to Financial Independence, so I figure I’m actually a good role model.

I was recently asked about my insurance situation, so thought I would share here now just what insurance policies I have in place as a homeowner and business owner, but also when in my journey from broke student to today I actually bit the bullet and bought them.

As my life has developed, and finances have permitted, I’ve added to my annual insurance costs. Currently, we spend in excess of $10,000 per year on insurance:

  • Car Insurance – I always opted for Comprehensive car insurance, because I had the cash and am a terrible driver. I also didn’t get my first car until I graduated from uni aged 21 – most of my friends had a shittier first car and had smaller policies (3rd Party, Fire, and Theft?) initially.
  • Contents Insurance – when I first moved out on my own (aged 22)
  • House Insurance – when I bought my first place. Actually, I had house (home?) insurance before I had contents insurance because I got my first mortgage while I was still living with my grandparents (age 21)
  • Health Insurance – from memory, my parents’ policy covered me while I was studying, and I lived dangerously in the early (broke) years of working. So I didn’t get health insurance until around the time I married my beautiful wife (age 26), and in part this was because I wanted to get in before the lifetime loading kicked in
  • Landlord Insurance – when we moved to London and turned our house into our first investment property (age 29)
  • Professional Indemnity and Public Liability – when I set up my own business, although I was initially covered for many years through my Shirlaws license so didn’t need these until after my 10 years with them concluded (age 24; then age 34)
  • Income protection insurance – when my businesses started to work and it became clear I wasn’t going to be employed anywhere with sick leave anytime soon! This was a big jump in insurance for me – all the others were either ‘obvious’ (eg, Car insurance) or necessary (eg, PI). Income protection is neither, to me, so was a slow process (age 32)
  • Life / Trauma / TPD Insurance – I have these because I don’t want to leave my beautiful wife and (hopefully) children with a whack of debt. Being tight, I initially said I would get these when we had children, but that’s taken a few years longer than expected and we can afford these so made them happen (age 35)
  • I won’t bother with Funeral Insurance since our emergency fund will always have that covered. Have I missed any other forms of insurance?

Some people look at insurances and only see value if they ‘win’ – ie, make more in claims than they pay in premiums. Some people avoid insurance, seeing it as a bet against themselves!

For me, they’re a hedge against an outlier (black swan, but not really) event that could ruin all our plans.

As we achieve financial independence we’ll likely start shifting into more ‘self insurance’ – for example, I won’t need income protection when I no longer need an income; when the mortgages are gone, life insurance will be less necessary. I’d definitely rather not be paying these premiums…but see them as good value.

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