Every household needs the same short list of policies. Everything else is either optional or a scam. The Scholar who can name the list — and the reasons — is more insured than most.
- 01List the six household insurances every adult should hold.
- 02State the tail risk that each addresses.
- 03Identify the insurances marketed to consumers that most households should decline.
The list
Health. Long-term disability. Term life if others depend on your income. Auto with adequate liability. Homeowner's or renter's. An umbrella liability policy above a certain net-worth threshold. That is the list.
The tail each addresses
Health: bankruptcy from a serious illness. Disability: loss of income from illness or injury. Life: loss of income to dependents on your death. Auto liability: a lawsuit from a serious accident. Homeowner's: fire or catastrophic loss. Umbrella: a lawsuit above the auto or homeowner's limits.
What to decline
Extended warranties. Rental-car collision waivers when your credit card already covers them. Whole-life insurance sold as investment. Cancer-specific or accident-specific policies duplicating existing health coverage. Identity-theft insurance. Most of these fail the tail test and are marketed on fear.
- Six core policies. Everything else is optional or worse.
- Whole life sold as investment is the most expensive product most households never realize they own.