Last year I heard a funny gurgling sound coming from the sink. No idea what it was, I took a walk over and noticed that water was leaking all over the floor. Quickly I realized it was coming from the dishwasher. After cleaning up the mess, the first thing I did was go to the large binder where we have accumulated numerous receipts and operational manuals from all the appliances we bought to see if it was still under the manufacturer’s warranty. Sadly, that warranty had long since expired. My wife said, “Did you buy the extended warranty?” My response, “I absolutely did not”. When she asked why not, I simply said, “THERE IS JUST WAY TOO MUCH INSURANCE!”. The funny thing is, this coming from someone who lives and breathes insurance on a daily basis.
Hear me out on this.
This is a list of the things you can insure:
- Appliances
- Electronics
- Jewelry/Watches
- Vehicles
- Homes
- Pets
- Vacations
- Your Life
- Your Income
When it comes down to it, you can basically buy insurance on everything you own. So, looking at an exhaustive list like this, how do you know what insurance you should have and what insurance you can live without? The truth is insurance purchases are often impulsive and not effectively prioritized.
Here are 3 questions that will help you prioritize:
#1. What does every insurance above have in common?
They all cost money. Most things in daily life operate on the premise that we have an income. We wake up in our house (mortgage), turn on the lights (electrical bill), have breakfast (food) and drive to work (car). These are all expenses we pay for out of our income, so the first and most crucial insurance we need to make sure we have is insurance to protect it, also known as “Disability Insurance”.
#2. What is my cost/risk level if an insured event happens?
Personally, I always suggest to start with a calculation. Let’s say, for example, I buy a $1,000 television. To get an extended warranty to cover me after the initial one-year warranty period costs $300 for an additional two years. I ask myself, is 30% of the purchase price worth the insurance? The two-year extra window of coverage does not seem worth it. In the event that my television doesn’t work, I am out $1,000. Not a small amount of money, but also not life changing. I can buy a new television or choose to live without one.
On the flip side, I ask myself, can I live without a paycheck or could my family continue to function on the same level if I wasn’t here? Likely not, which means my risk level is much greater, and I am more likely to cover that risk.
#3. What is most important to me and my family?
Finally, insurance is really about peace of mind. When making decisions on what to protect and what to leave at risk, one needs to think of their life and how it would be impacted by an event should it occur. Quite often, I will ask a client to rank the following events on a scale of 1-10 (1 being an insignificant event and 10 being an event that would dramatically impact their life).
- Fender bender car accident
- House fire
- Air conditioner not working
- Life-threatening cancer
- The death of a spouse
Each client puts a 9 or 10 beside the last two events. So, in our planning discussion, these are the first two things we focus on protecting.
Whether you have an existing insurance portfolio or are considering insurance, we welcome you to reach out to us to discuss your personal insurances. We are just a phone call away.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
The views expressed in this commentary are those of Tall Oak Capital Advisors as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Statistics, factual data and other information are from sources Tall Oak believes to be reliable but their accuracy cannot be guaranteed. This commentary is intended for distribution only in those jurisdictions where Tall Oak Capital Advisors are registered. Securities-related products and services are offered through Raymond James Correspondent Services Ltd., member Canadian Investor Protection Fund. Insurance products and services are offered through Gryphin Advantage Inc., which is not a member-Canadian Investor Protection Fund. This commentary may provide links to other Internet sites for the convenience of users. Tall Oak Capital Advisors is not responsible for the availability or content of these external sites, nor does Tall Oak Capital Advisors endorse, warrant or guarantee the products, services or information described or offered at these other Internet sites. Users cannot assume that the external sites will abide by the same Privacy Policy which Tall Oak Capital Advisors adheres to.
