15 June 2006

insurance, or: is the shoe-box under the bed enough?

in our on-going saga of adjusting to the UK, one of the things we've noticed is that despite the overwhelming and draconian presence of the insurance industry in the US, it is only here in the UK that insurance is something you buy casually, say at the pub. one can buy insurance to 'cover' you (cover is the key verb-noun used here) in the event of your groom leaving you at the altar. it's called 'wedding cover' (for as little as £56!) of course travel cover is normal, which makes sense given that the NHS doesn't really extend beyond the borders of the UK, with only a few tentacles to cover you in the EU. but this gets to ridiculous levels fairly quickly. one can buy auto cover, and then add on 'legal cover' to your auto cover. this insurance covers you in case of an accident that is not your fault and involves hiring a solicitor. the guardian deems this a bit over the top.

I've always been mystified by life insurance policies. I get that when you die there are expenses, and certainly if you have dependents there's a need to provide for them. but if both adult partners work, and there are no dependents--shouldn't you be exploring other investment/savings/tax-hidden/estate-tax-protected options besides tossing £10/month at a life assurance policy that only pays out if you die before the end of its term? yes, it would be hard and not fun to have to sell the house and move into another, smaller one in order to make ends meet. but if it's the choice between that hassle and literally throwing money at a fatcat insurance industry that tries to scare me into things? hm. if anyone has thoughts in support of life insurance for a pair like Sam and I, let me know. happy to hear the arguments.

but I have to say, the shoe box is lookin' pretty good right about now.


northwestern mutual said...

there are more complicated life insurance products than simple term life, many of which offer tax advantages in the U.S. and can serve as investment vehicles, but they are quite complicated, so make sure you know exactly who is getting paid what in the deal.

Number Three said...

I'm hoping that that first comment is a joke. Or else the comment spammers are getting very, very sophisticated . . . .

But to the point of the post, self-insurance makes sense unless, as a thirtysomething working couple without children, you have (incurred) expenses far beyond the ability of one spouse to manage, at least in the short-run. Kids change the equation. Am I to assume that the university doesn't provide some kind of minimal life insurance as a job benefit?

Rebecca said...

yes, since the health insurance thing doesn't exist here, there isn't much of a 'benefits package' included--aside from a pension. and we did pay for minimal life insurance policies before--to cover funeral expenses, that sort of thing.

but here the policies won't cover you past retirement age in many cases. so it seems like we should put some portion of our retirement income aside for funeral expenses etc. and then stop worrying about it. Have it earn money for us at a similar rate we'd be paying out if we had a life insurance policy.

meanwhile, I'm turning into a curmudgeon who complains about insurance and the greedy bloodsuckers. This is, in fact, my ultimate goal in life--to be curmudgeonly. so it's all good.

Ruth said...

But chances are the middle-class 30-something working couple HAS incurred at least one major expense beyond the ability of one spouse to manage: that is, a mortgage. A little bit of self-insurance can works there, of course: make sure that you've got enough in savings that the surviving partner won't lose the house. If you're not starting with a cushion of fairly substantial savings, though, this would require much more of a set-aside than a life insurance policy (I think to get 100k of life insurance, I'd have to pay about $15/month. At that rate, it would take more than 2 years of premiums before I hit one month's worth of my half of our mortgage). So the answer?

1) Start off rich; or
2) Only buy half the house you think you can afford, and spend the rest however you like; or
3) Only buy 2/3 of the house you think you can afford, and sock the rest away into a retirement/emergency fund; or
4) Buy what you can afford, and invest in life insurance; or
5) Get used to the idea that you'll be selling up (or selling a lot of plasma) if your partner dies.

Speaking of insurance, I just discovered that somehow, without my realizing it, I've been paying for accidental death and dismemberment insurance through work for the past 7 years. I swear I never signed up for this. It's only 1.80 a month, which is probably why I never noticed it before -- but still.