Understanding Insurance

This workbook turns the course into a personal insurance audit. You will list every policy you hold, run each risk through the insure-the-catastrophe grid, size your life and disability needs, compare health and property options on the numbers that matter, and end with a written plan to drop wasteful coverage and fix real gaps. Work one section per module, and use the templates to keep your policies, costs, and renewal dates in one place.

Inventory what you pay for now and sort every risk into transfer, reduce, or self-insure.

List every insurance policy you currently pay for. For each, pull the premium, deductible, key limit, and renewal date from the declarations page. This is your starting picture before you decide what to change.

For each risk you face, decide whether a loss would be catastrophic or merely annoying. Catastrophic losses you cannot self-fund belong on insurance; small ones belong in your emergency fund.

Plot your real exposures by likelihood and severity, then assign each one an action. This points you to where your insurance dollars should and should not go.

Decide whether you need life insurance, size it honestly, choose term, and protect your income.

Be honest about who depends on your income. If no one would suffer financially without you, you may not need life insurance at all. If people do depend on you, move to the sizing worksheet.

Add Debt, Income, Mortgage, and Education, then subtract existing savings and any coverage you already have. The result is your target death benefit. Cross-check it against ten to fifteen times your income.

Disability is more likely during your working years than premature death. Map what would happen to your income if you could not work, and what coverage you already have.

Estimate your real annual cost per plan, match the plan to your usage, and use coverage fully.

For each plan you are considering, add twelve months of premium to your expected out-of-pocket spending. Compare the totals, not the premiums alone, and note the out-of-pocket maximum as your worst case.

The cheapest plan depends on how much care you expect to use. Estimate your year honestly, then decide whether a low-premium or low-deductible plan wins for you.

If you choose a qualifying high-deductible plan, a Health Savings Account gives a rare triple tax advantage. Plan whether and how much to contribute.

Right-size property and liability limits, compare quotes on identical terms, and plan clean claims.

Check that your dwelling coverage equals rebuild cost and that your liability limits reflect what you have to lose. Note gaps to fix, especially low liability and excluded perils like flood.

Collision and comprehensive only pay up to your car's value. Apply the 10 percent rule to decide whether to keep them on each vehicle, while keeping liability no matter what.

Line up competing quotes on identical limits and deductibles so the prices describe the same protection. Compare coverage type, exclusions, and the insurer's reputation, not just the monthly cost.