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If someone steals your personal information — like your name, social security number, address, credit card number, etc. — and uses it to impersonate you, then you’re a victim of identity theft. Identity theft insurance offers some protection in the event that your identity is stolen.

In 2023, the Federal Trade Commission (FTC) received more than 1 million reports of identity theft. And the AARP found that, “American adults lost a total of $43 billion to identity fraud in 2023.” So, it makes sense that — if protection exists against identity theft exists — you want it.

What is identity theft protection?

Identity theft products are essentially a combination of insurance and credit monitoring. Some offer additional features and monitoring like searching the dark web for your personal information (social security number, email address, etc.).

The insurance usually covers the costs associated with repairing damages brought on by identity theft. This includes things like bank fees, costs for new documents, legal fees, notary fees, etc. It may or may not cover stolen funds if your accounts are hacked. You need to read the fine print. 

Additionally, you benefit from getting access to their experts to help you through the cumbersome and expensive process to recover your identity.

Identity theft insurance cannot prevent your identity from being stolen. 

Protecting yourself from identity theft

To protect yourself, develop good habits around protecting your personal information. 

• Don't share sensitive personal information like social security numbers and account numbers through email and other insecure methods.

• Use strong passwords and don't use the same password on multiple sites.

• Use a secure password manager.

• Use a personal VPN when using public networks.

• Be wary of unexpected emails or texts with links from unknown numbers (ie, phising).

Freezing your credit

A credit freeze is the best way to protect yourself against identity theft.

If your credit report is frozen, it prevents unauthorized parties from opening accounts in your name. You can freeze your credit with each of the 3 major credit bureaus at no cost. Use the links below to create a free account. Once you have accounts, freezing (and unfreezing) your credit report can be done easily in just a few minutes. 

• Equifax 

• TransUnion Online Service Center 

• Experian 

Remember that you will need to unfreeze your credit report in order to apply for a new loan or credit card.

No 🧢 Takeaways

• Identity theft is a very common crime and growing. 

• Buying identity theft insurance makes sense for most people and it's inexpensive. 

• Freezing your credit report is free and is the best way to protect yourself against identity theft.

• Protect your personal information by using encryption and a secure password manager.

Types of Coverage

There are 4 common types of coverage in an auto insurance policy.

1. Liability - protects you when you're legally responsible for causing damages or harm to other people and/or their property.

   • • Bodily injury - covers the cost of medical expenses for anyone you've injured while driving.

     • Property damage - covers the costs to repair and/or replace property you’ve damaged while driving.

2. Collision - covers the costs to repair and/or replace your vehicle after a car accident.

3. Comprehensive - covers the costs to repair and/or replace your vehicle after damages caused by non-collision events. Examples include cracked windshields, hail damage, tree falls on your car, vandalism, theft, etc.

4. Uninsured/underinsured motorist - Around one in eight drivers are uninsured. Many others are underinsured. This type of coverage protects you in the following scenarios:

   • • You’re hit by a driver who does not carry any liability insurance.

     • You’re hit by a driver who flees the scene.

     • You’re hit by a driver who carries state minimum liability insurance, but the cost of damages and/or medical bills exceeds what the at-fault driver carries.

Guidelines

• State laws require you to have minimal liability coverage. 

• In many states, you are also required to have uninsured/underinsured motorist coverage.

• If your car is financed, your lender will most likely require you to carry both collision and comprehensive coverage.

• If your car isn't financed, consider dropping collision and comprehensive coverage.

Rule of thumb: When your annual cost for collision and comprehensive coverage is more than 10% of your car's value, consider dropping the coverages.

Ways to Save on Auto Insurance

• Raise your deductibles. This is the best way to lower your premiums. If you have money in an Emergency Fund, you should be able to cover the deductible amount without incurring financial hardship. Aim for at least a $1,000 deductible.

• Avoid unnecessary claims. If you file an insurance claim, your rate will most likely go up. How much your rate will increase depends on the type and severity of the claim, but any claim you file makes you riskier to your insurer. And the greater the risk to protect you, the more you pay for protection.

• Eliminate unnecessary coverages. Many auto policies will include optional coverages such as towing & labor and rental car reimbursement. You don't need these and using these coverages is likely to cause your premiums to increase.

• Shop for car insurance every 3-4 years. You'll likely find a cheaper policy with similar coverage.

• Stick with companies that are rated A+ or higher by A.M. Best.

• Best auto insurance companies - Amica, USAA, Erie, and Auto-Owners

• Maintain a high credit score (>760)

• Bundling auto and home insurance often results in discounts.

• Stay accident-free

• Avoid speeding tickets

How much insurance do you need? The more assets you own, the more car insurance you need. If you have no assets, you may be okay going with lower liability coverage (and thus lower premiums). If you own a home, have investments, or other valuable assets, you will need higher liability coverage to protect your assets.

No 🧢 Takeaways

• You need liability and uninsured/underinsured motorist coverage. The other coverages are optional.

• You need more liability than what state law requires.

• If you maintain a high credit score (>760), avoid speeding tickets, and stay accident-free, you'll get the best rates.

• Raising your deductibles to $1,000 or more will significantly decrease your premiums.

• Shop for new car insurance every 3-4 years to find better prices.

home stuff

Life insurance has one purpose: to replace your income for those who depend on it when you die.

If you understand that one purpose, it's easy to sift through all of the various types of policies to determine what you need.

The two categories of life insurance are term life insurance and permanent life insurance. In the permanent life insurance category, there are an endless number of types that are marketed - whole life, universal life, variable life, indexed universal life, variable universal life, guaranteed universal life, etc. The differences between the different types of permanent life policies are unimportant as they all share the same drawbacks.

Here are the key differences between the two categories:

Term life insurance 

• Provides coverage for a specified period

• Pays a death benefit only if the insured dies within that term

• No cash value component

• Low premiums

Permanent life insurance

• Lifelong coverage with a death benefit

• A cash value component that grows over time

• High premiums (10-15x more than term!)

• High complexity

• High fees and commissions

• Surrender charges

• Lower returns than alternative investments

Can you see why permanent life insurance is an inferior product for fulfilling the one purpose of life insurance? It aims to be both an insurance produce and an investment vehicle. As a result, it's a poor choice for either one!

For almost everyone, the best life insurance is term life insurance.

Purchasing Life Insurance

When buying term life insurance, you’ll need to decide on the term (usually 20-30 years) and the amount of coverage. In order to do this, consider what it is that you want to be covered if you were to die. Here are the main areas to consider:

• Home mortgage, car loans, student loans (really, any outstanding debts)

• Education expenses for children

• Family's everyday living expenses over their lifetime

If you're unable to confidently calculate how much you need, use this good rule of thumb:

Rule of thumb: Get coverage equal to 10 times your gross annual salary.

When shopping for a policy, stick with companies rated A++ by A.M. Best for financial strength. Other than that one criteria, just look for the cheapest policy you can find.

Here are some A++ rated life insurance companies to consider:

MassMutual, USAA, New York Life, Northwestern Mutual

No 🧢 Takeaways

• Life insurance has one purpose: to replace your income for those who depend on it when you die.

• Term life insurance is the best insurance for almost everyone.

• Stick with companies rated A++ by A.M. Best for financial strength.

• Run, don't walk, from insurance salesmen. Buy term life insurance online.

• Never buy life insurance for kids.

• Never buy universal life or variable universal life policies. They're garbage.

• Whole life policies can be good for ultra-high income earners (> $400k/yr) who can benefit from some of the tax advantages.

Nobody likes to think a serious illness or injury will strike them. But the reality is that it happens — despite how young and healthy you believe yourself to be.

If this happens to you, then disability insurance steps in to protect your income when you can’t otherwise earn a paycheck.

Common reasons for long-term disability claims include:

• Accidental injuries (ex: fractures, sprains and strains)

• Cancer diagnosis and treatment

• Mental health challenges

• Musculoskeletal disorders (ex: back pain, joint pain)

• Pregnancy complications

Long-term policies often pay 50% to 60% of your income. Common policy periods are 2-5 years and include a waiting period of 90-180 days before the policy starts paying a benefit.

There are three main ways people get disability insurance:

1. At work, with premiums either paid by the employer or the employee.

2. Through a trade association or college alumni group.

3. Purchased by individuals on the open market (e.g., Policygenius).

No 🧢 Takeaways

• If you have financial dependents, you should purchase L/T disability insurance.

• Skip S/T disability insurance (unless paid for by your employer) and use your emergency fund.

• The policy will likely be cheaper through your employer or some type of group (e.g., alumni group).

Umbrella insurance is one of the best deals in the world of insurance. It provides additional liability coverage for both both your car and home (and rental properties). It's typically sold in increments of $1 million dollars and is very affordable (e.g., $200-400 for a one million policy with incremental amounts being even less).

For additional information about umbrella insurance, including what's typically covered and coverage amounts, see this article on Fidelity's site.

No 🧢 Takeaways

• Umbrella insurance is very affordable compared to other types of insurance.

• It's highly recommended if you own property, a business, or have other significant assets.

• To determine how much you need, compare the value of your assets to the liability coverage limits that you have from your base insurance policies (ex: your auto and home insurance). If your assets are more valuable than your current liability coverage limits, strongly consider buying an umbrella insurance policy.

Every time you rent a car, the car rental company will try to sell you insurance coverage (usually called Collision Damage Waiver and/or Loss Damage Waiver). It's expensive and you don't need it. Decline. Decline. Decline.

Personal Auto Insurance

Your personal auto insurance policy most likely covers you when driving a rental car. The specific type of coverage depends on what you carry in the policy. For example, your auto policy will always have liability coverage so that applies when you're driving a rental car as well. If your auto policy includes collision and comprehensive, then those coverages will also apply to the rental car.

The deductible for the rental car coverage may not be the same as what it is for your personal car. You will need to read the policy to understand the specific details. 

NOTE: Personal auto insurance doesn't cover international travel.

Credit Card Benefit - Rental Car Insurance

Many credit cards advertise rental car insurance as a benefit for cardholders. This falls into one of two categories - primary insurance and secondary insurance.

• With primary coverage, your credit card covers the cost directly (up to the coverage limits in your card agreement). There's no deductible to pay and no need to go through your own insurance.

• With secondary coverage, you start by going through your own insurance company, and then the credit card covers any remaining costs. Secondary coverage would reimburse your deductible, for example.

If you're going to rely on this coverage for rental cars, you want a card that offers primary insurance. This means that you will not have to rely on your personal auto insurance policy for damages to the rental car. Avoiding claims with your insurance company is always a good thing!

Here are some cards that offer primary insurance for rental cars:

• Bilt Mastercard (no AF)

• Chase Sapphire Preferred ($95 AF)

• Chase United Explorer ($95 AF)

• Capital One Venture X ($395 AF)

• Chase United Club Card ($525 AF)

• Chase Sapphire Reserve ($550 AF)

NOTE: This coverage only applies to damage or theft involving the rental car. It doesn't provide liability coverage for damage to other property or harm to others.

American Express Premium Car Rental Protection

Another idea is to enroll in an optional insurance product offered by American Express. You only pay when you rent a car. Put your car rental charges on your enrolled card and the fee will be automatically added to your account. I think this is a no-brainer!

• Flat rate of $19.95 per rental.

• Coverage is primary for theft and damage to a rental car.

• No deductible.

• Coverage is worldwide (excl. Australia, Ireland, Israel, Italy, Jamaica, and New Zealand).

• Coverage is for up to 42 consecutive days.

NOTE: This coverage only applies to damage or theft involving the rental car. It doesn't provide liability coverage for damage to other property or harm to others.

No 🧢 Takeaways

• Decline expensive coverage offered to you by the rental car agency!

• Your personal auto insurance policy most likely covers you when driving a rental car. Check to be sure.

• If you're going to rely on coverage through a credit card, use one that has primary insurance coverage.

• The AmEx Premium Rental Car Protection is a great, low-cost option!