All You Need to Know about Insurance to Protect Your Income and Wealth

All You Need to Know about Insurance to Protect Your Income and Wealth

Motley Fool Staff, The Motley Fool

Sun, August 16, 2026 at 2:05 AM GMT+3 26 min read

In this episode of Motley Fool Hidden Gems Investing, Motley Fool personal finance expert Robert Brokamp is joined by Foolish colleague Amanda Kish to discuss:

• The types of insurance every person should consider.

• How to determine the right amounts of coverage.

• Considerations when buying a new policy or evaluating a current policy.

• When it makes sense to get professional help with insurance.

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A full transcript is below.

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*Stock Advisor returns as of August 3, 2026

This podcast was recorded on Aug. 1, 2026.

Robert Brokamp: You spend your adult life growing your income and net worth. Here's how to protect them from calamity and tragedy. This week on the Saturday Personal Finance Edition of The Motley Fool Hidden Gems Investing podcast. I'm Robert Brokamp, and it's the first Saturday of the month, which means it's time for the next installment of our 2026 financial planning challenge, which we're calling a well plan. We spent most of this year discussing how to accumulate and manage your wealth. This month, we're going to talk about how to protect it. Yes, we're going to talk about insurance, and yes, we know it's among the least exciting topics in all of personal finance, but it can also be among the most important. I promise that if you stick with us for this episode, you will learn a thing or two about insurance that you didn't know beforehand. Here to help me talk through this safety net audit is Certified Financial Planner® and chartered financial analyst Amanda Kish. Welcome back, Amanda.

Amanda Kish: Thank you so much. I'm glad to be back.

Robert Brokamp: Let's start off with health insurance. While I think folks might consider it the most important type of insurance, it's actually the one we'll probably talk the least about today, since most people get it through their employer or maybe the government via Medicare, and you generally can't make any changes to it except during certain times of the year, like open enrollment, and that's generally not in August. That said, we do want to plant some seeds for folks to think about. The next time they have to make a decision about their health insurance. Amanda, what should people be thinking about?

Amanda Kish: You're right, most of us are probably stuck on the sidelines right now until that open enrollment period, but that's actually the perfect reason to start thinking about it now instead of waiting until November when we're frantically clicking through that benefits portal under threat of a deadline. The big decision that most people wrestle with is, do I want a high deductible health plan versus that traditional PPO or preferred provider organization? The high deductible health plan has a much higher and, quite frankly, scarier-looking deductible, but that usually comes with lower premiums.

And importantly, that's your ticket to opening a health savings account or HSA, which is the only triple tax-advantaged account in the entire tax code. That means money goes in tax-free, it grows tax-free, and then comes out tax-free for medical expenses. If you've got a high deductible health plan, max out that HSA, if you can. Here's potentially a smart move. You can pay those medical bills out of pocket now if your budget will allow it, but save those receipts and let that HSA principal grow untouched for years, possibly even decades, and then you can reimburse yourself for that decades-old copay anytime you want, as there's no expiration date. With that in mind, that HSA can quickly become one of the best retirement accounts that you'll ever have.

But ultimately, the seed I want to plant here is, don't just default to whatever health plan you picked five years ago. Make sure you run the numbers on premiums versus deductible risk versus HSA eligibility every single open enrollment.

Robert Brokamp: Those are excellent points about the HSA, and I'll add that it can also be used to pay for Medicare premiums, not Medicare insurance premiums, but the main Medicare premiums. Withdrawals can also be used to pay for long-term care and long-term care insurance premiums. It's a very powerful retirement account. Let's move on to life insurance, and this is meant to replace the income that is lost when a breadwinner passes away. Amanda, who needs it, and how much do they need?

Amanda Kish: One way to think about life insurance is that it really is just a form of income replacement. If people depend on your paycheck, whether that's a spouse, kids, maybe an aging parent, you probably need it in some form. If there's no one that's financially dependent on you, then life insurance may be less of a priority. For most working-age folks, I think term life insurance is probably going to be your best bet as opposed to something like whole life that retains that cash value. Term life is cheap, it's simple, and it has exactly one job that it does, and that it pays out if you die during that term that the policy is in effect. A common rule of thumb is that you're going to want 10 to 15 times your annual income in coverage. That's just a starting point. I think the more precise method is to actually do the math. Add up what you're trying to cover, whether that's replacing income until retirement, paying off the mortgage, funding college for your kids, and then back out whatever you've already got, like existing savings or a 401(k), and then that gap is your target coverage number.

Then on term length, you want to try to match it to your need. For example, if your youngest just started kindergarten, for example, a 20-year term gets them all the way through college. If your mortgage has 15 years left on it, a 15-year term might work, and don't forget about laddering. This is a process of buying a couple of smaller staggered policies with different term lengths instead of just one giant policy. Over time, your coverage is going to step down naturally as those policies expire and also as your obligations shrink. Creating a ladder this way can potentially be cheaper because you're dealing with numerous smaller dollar-value policies instead of one giant one. It's also a nicer way to taper that coverage as your life situation changes without really having to put too much thought into it.

Robert Brokamp: I totally agree that it's best to do an analysis to determine how much life insurance you need. You'll find plenty of calculators out there on the Internet, and heck, why not let AI have a go at determining how much you need? I found that each tool will come up with a different number, so I would recommend that you use a few. If you can afford it, default to the highest amount, the cost of term insurance will depend on your age and your health conditions. But for most people, having an extra 100,000, $200,000 of insurance really won't be that expensive, so it's probably better to play it safe that way. By using that tool, you can incorporate the insurance that you may already have, which might include Social Security, since your dependents may be eligible for benefits. Download your Social Security statement at ssa.gov to see what those benefits could look like.

You might also have life insurance through your employer, though I would think about how long you expect to be there. If you don't expect to be with that employer for much longer, I would ignore that when evaluating how much more you need to buy, since you don't know how much coverage you'll get at your next job.

Finally, I'm just going to point out that life insurance payouts are usually tax-free, which I think is an underappreciated benefit of life insurance. You need life insurance to replace the income of someone who passes away, but there's actually a greater chance that you'll become disabled and be unable to work before age 65, which brings us to our next form of insurance, disability insurance. Now, fortunately, most of us have some form of disability insurance through Social Security, though it could be problematic, as you may point out. Many of us get additional coverage from our employers, but that may not be enough. Amanda, what do people need to know about disability insurance?

Amanda Kish: This is one aspect of insurance coverage a lot of folks tend to not think about until they need it. By then, of course, it's too late to shop for it, and as you mentioned, your odds of becoming disabled before 65 are meaningfully higher than your odds of dying before age 65, yet it's far more common for people to insure the death and ignore the disability portion. As you mentioned, Social Security disability insurance does exist, but it tends to be, let's say, fairly stingy and notoriously hard to qualify for. You basically have to be unable to do any substantial work, not just your job.

Another option, as you mentioned, is employer-provided group long-term disability. That's a great start, can work very well for many of us, but there are two things that can trip people up. First, it typically only replaces 50 to 60% of your income, so make sure you know how much coverage you actually have. Then, if your employer pays the premiums, then that benefit is taxable when you get it. That 60% shrinks even further after taxes, and that's where an individual disability policy can fill the gap. I think this can be especially useful for higher earners or people in very specialized fields.

The phrase to look for here is own-occupation coverage, meaning you get paid if you can't do your specific job, even if you could technically work in a different, maybe less demanding, field. That's very different from any occupation coverage, which pays out only if you can't work at all. That own-occupation coverage, as you might guess, costs more. But for someone who may be at a highly specialized field, like a surgeon or an attorney, having that own-occupation coverage can really be the difference between having real protection and what could potentially be a staggering coverage gap without it.

Robert Brokamp: Now, due to that higher likelihood of becoming disabled than dying before age 65, disability insurance is going to cost anywhere from two to four times more than life insurance, which will scare some people from buying it. But you can do a few things to lower the cost, such as choosing a longer elimination period, which is the time between when you become disabled and the time the policy pays out, then you have to make sure that you have a good-sized emergency fund to cover that time period. You mentioned the employer-provided coverage, very valuable. It is important to understand whether it has a Social Security offset or not. It might say, this policy is going to cover 60% of your income, but if you're going to get 15% of your income from Social Security, we're only going to do 45%. You have to understand how that interacts with Social Security, and then finally, if you ever have the option of paying premiums with pretax or after-tax money, maybe because you're self-employed or your employer might actually give you the option. Most experts recommend that you pay with after-tax money. That way, the benefits will be tax-free.

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Robert Brokamp: We just talked about the insurance that protects your income, but you can also buy it to protect your stuff if something happens to it. This really comes down to auto insurance and then homeowners', renters' insurance. Both have become a lot more expensive over the past five years, so it's a good time to evaluate not only how much you need, but also whether you can get a better deal somewhere else. Let's start with auto insurance. Amanda, what do Fools need to think about?

Amanda Kish: When it comes to auto insurance, I think one of the first things people tend to get wrong is liability limits, and a lot of folks are still carrying their state's bare minimum, which in many states can be incredibly low, sometimes as little as $25,000 per person for bodily injury. That sounds fine until you end up, unfortunately, totaling an SUV or potentially injuring someone, and suddenly, that minimum coverage can seem a little inadequate. I would generally push people towards at least a 100, 300, 100 split in liability coverage if they can afford it, and what that is is $100,000 per person, 300,000 per accident for injuries, and 100,000 for property damage. If your net worth is growing, your liability protection should grow with it, and that does tie into umbrella insurance, which we'll get to.

Then on the flip side, for something like comprehensive and collision, that's the coverage that protects your car. You can do the math on whether that's still worth it. If your car is old enough that it's worth less than, say, a couple thousand dollars, 405 grand, you might be paying premiums that outweigh what you'd actually collect in a claim. That's a case where dropping that coverage and self-insuring may make sense. Regardless of any of that, make sure you shop your policy every renewal. Those loyalty discounts you have may be nice, but they may not beat what a simple five-minute comparison across insurers can end up saving you.

Robert Brokamp: That's all good advice, and this is a good time to point out that insurance in general can vary by state, and this is definitely the case with auto insurance. Definitely take the time to understand what's required in your state, including whether you live in a no-fault state. If so, you'll likely be required to carry personal injury protection coverage to pay your own medical bills regardless of who causes the accident. As you point out, Amanda, the minimums in many states are really much too low, and Fools should probably increase those amounts that will lead to higher premiums, but that can be counterbalanced by having larger deductibles for your collision and comprehensive. Going from a $250 deductible to a $2,000 deductible can cut your premiums in half or more. Of course, just making sure that you're investing those savings so that they're available if you need to cover those costs after an accident.

Let's move on to homeowners and renters insurance, which have some commonalities and some differences. What should people be thinking about here?

Amanda Kish: Renters insurance first, because I think this is one of the more underrated $15-a-month purchases in personal finance. A lot of renters tend to skip this coverage because they think, well, I don't own much, forgetting that the policy also covers liability. For example, if you have a guest in your house, they slip and fall in your kitchen, and then it also covers the stock, say, if the building burns down or you get robbed, neither of which is covered by your landlord's policy. Your landlord's insurance protects the building, and that does not include your laptop, or your furniture, or your other personal belongings.

Now, for homeowners, the big thing to check is whether your dwelling coverage is based on replacement cost or actual cash value. Actual cash value factors in that depreciation. Let's say if your roof burns down, you might get paid what a 15-year-old roof is worth, not what a new one costs to rebuild. That replacement cost coverage actually pays to fully rebuild it. Then, given how, as we probably know, construction costs have climbed in recent years, I'd also think about looking for a policy that has a built-in inflation guard so that your coverage limit is going to automatically rise instead of potentially quietly falling behind the cost of both lumber and labor.

One big item that both renters and homeowners tend to miss flood and earthquake damage are almost never covered by a standard policy. If you're in a flood zone or potentially even if you're just near a floodplain that has expanded in recent years, that's a separate policy that you need to actively go by, whether through the National Flood Insurance Program or through a private insurer.

Robert Brokamp: It's very important to understand what's covered and what's not. Is damage from mold or termites covered? Is theft of jewelry or other big-ticket items covered? What about a home-based business? Make sure you read your policy and understand what's covered there. Also, it's important to document what you own. Just go around your house or apartment and video all your belongings, so you have proof when you need to make a claim in case of some really bad fire or some other thing where everything is damaged and gone. This is another category of insurance where you lower the premiums by having a larger deductible, but besides that, another reason to have a high deductible is that you really should be filing claims for small amounts anyhow because that's going to increase the chances that the insurance company will raise your premiums in the future or just drop you altogether.

When it comes to property insurance, it's best to think of it as a way to pay for really big-ticket losses and cover the smaller losses yourself. If you can afford a 2,000, 3,000, maybe 5,000 deductible, and the savings on the premiums are worth it, that might be the way to go. You talked a little bit about liability insurance, and it is often tied to homeowners or renters insurance, but there's an expanded version also known as umbrella insurance. What does umbrella insurance cover, and how much do people need?

Amanda Kish: Umbrella insurance is an interesting insurance to talk about because it's cheap, and cheap insurance that actually matters is rare. You can think of it as the extra layer of liability protection that kicks in once your auto or homeowner's liability limits gets maxed out. Let's say someone sues you after a car accident, and the judgment against you is $800,000, but your auto policy only covers 300,000. Then your umbrella policy steps in to pick up the rest instead of your house or your brokerage account being on the hook for the remainder. Now, a $1 million umbrella policy typically costs somewhere in the neighborhood of anywhere 150 to $300 a year, which, all told, is incredibly cheap for the protection that it buys. The general guideline is your umbrella coverage should be roughly equal to your net worth or at least cover the assets you'd hate to lose in a lawsuit. And keep in mind that if things apply to you in your situation, so you've got a pool, a trampoline, a dog with a little bit of an attitude, a teenager who just got their driver's license, your lawsuit risk may be higher than average. Keep in mind that umbrella coverage it's one of the easiest and cheapest ways to help you protect all those hard-earned assets.

Robert Brokamp: That's remarkable what umbrella insurance can cover, including events away from your home and even outside the country, legal costs for various forms of lawsuits, even things like libel and slander. Plus, as you said, Amanda, it's pretty affordable, so definitely get enough to cover the assets you could lose in a lawsuit.

Now we're going to come to the final type of insurance that we will discuss, which is long-term care insurance. Around two-thirds of people over the age of 65 will need some form of long-term care. It's usually provided by family members, but if you have to pay for it, it can cost between 50,000, $150,000 a year. On average, it's needed for about three years, though for around 20% of people, it's needed for five years or longer. People who have saved enough might choose to plan to cover these costs with the assets they've accumulated, but another option is long-term care insurance. Amanda, what's your take on when this type of insurance makes sense?

Amanda Kish: Long-term care is the retirement risk that many folks tend to underestimate. It's not a guarantee that you'll need it, but that tail risk that you're going to fall into that small group of people who require very intensive, extended, or expensive care is still severe enough that it deserves some real consideration. That traditional standalone long-term care insurance has fallen a little bit out of favor over the years because premiums have really had a track record of rising sharply after people bought policies, in some cases doubling, which has understandably left a lot of folks a little gunshy about signing up.

One thing that has emerged in that absence is this hybrid life insurance, long-term care policies, and those have really grown in popularity in recent years. With that, you get a death benefit if you never need that care and also a pool of money that you can tap for care if you do need it, with premiums that tend to be a little bit more predictable. These hybrid policies are not cheap, but for folks who hate the idea of wasting a premium on care they may never need, that hybrid model does solve that psychological hurdle a little bit. Then the other option, which you mentioned earlier, is self-insuring, so building enough of a cushion in your portfolio that you could cover a few years of care out of pocket if needed. This option tends to make the most sense for people at the higher end of the net worth spectrum, where the assets are there to absorb the cost, or conversely on the lower end, where Medicaid can become that backstop much more quickly. It's really the folks in that middle ground who have, maybe enough assets that they're going to lose sleep over it, but not quite enough assets to totally shrug off that risk, who may benefit the most from exploring that long-term care coverage.

One thing I'll mention is that timing on this does matter. When you're in your 50s, that's usually the sweet spot to shop. Since after that, as you get older, premiums tend to climb, you get more health-based denials, and those tend to rise the longer your wait. Just keep that in mind, that timing does matter if you do want to explore how that long-term care coverage can fit into your overall insurance picture.

Robert Brokamp: You mentioned Medicaid, which is the joint state-federal program for low-income citizens. It's actually the number one payer of long-term care expenses in America, but you have to dwindle down your assets to become eligible, and you may not have much say in the type of care you receive. Medicare, which is the health insurance program for folks 65 and older, provides very little in terms of long-term care coverage. Everyone really should have a plan for how these costs will be covered. If you go the self-insured route, you may want to set aside a percentage of your retirement portfolio, say, maybe 5%, 10%, that you only touch if you have a big-ticket, unexpected expense, such as long-term care. You might, if you're willing, to conclude your home equity as part of that, if you're open to either selling your home or getting a reverse mortgage as a way to pay for long-term care.

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Robert Brokamp: We've covered the major types of insurance. The next question is, how to buy it? Amanda, do you think people can do most of this on their own, or are they better off getting help from a professional, whether it's a financial planner or maybe an insurance professional?

Amanda Kish: I think that really depends on the policy. If we're talking about auto, homeowners, or renters insurance, those things are fairly commoditized at this point. Comparison shopping online or possibly through an independent agent works fine, and honestly, that's something you should be doing every couple of years anyway, no matter what.

Where I think a professional potentially could make more sense is on that more complex stuff. When you're talking about life insurance amounts, how that's structured, disability insurance with that own-occupation versus any occupation nuances. Then, especially for long-term care and hybrid policies where those products themselves are genuinely complicated and that underwriting can vary a lot between the different carriers. In this case, an independent agent is one who represents multiple insurers. That's what I would recommend here rather than someone who only sells one particular company's products because an independent agent is, I think, a little bit more likely to give you a better deal across multiple products.

Of course, a fee-only financial planner can, of course, help you figure out how much coverage you actually need before you even talk to an insurance agent. That's going to potentially keep you from being sold more policy than your situation actually calls for.

Robert Brokamp: I agree with all of that. The more complicated the type of insurance you need or maybe the more complicated your situation, maybe you're looking for long-term care insurance or life insurance, but you have some pre-existing health issues, the more you're going to benefit from working with a professional. I'll add, too, that I've heard recently from some financial planners who have begun selling insurance, not because they were looking to make more money, but because they'd make a recommendation to a client, but then the client wouldn't get around to actually implementing it, or the client went to an insurance agent and got talked into buying unnecessary or expensive coverage. However you choose to buy your coverage, just make sure that you become very informed, make it a priority, and get it done. Amanda, any final words of wisdom about insurance?

Amanda Kish: Yes, thank you. I would just say insurance isn't about protecting you from every possible bad thing. It's about protecting you from the big catastrophic one. The stuff that would derail your financial life if it happens. Make sure that the big stuff, so we're talking about your income, your health, your home, your liability exposure is genuinely covered. Do a quick audit once a year, so pull up your policies, check your limits against your current life, not the life you may have had five or 10 years ago when you bought the policy, and ask whether you're paying for coverage that you may not need or that you may have outgrown.

As you mentioned at the top of the show, Robert, I know insurance in general is not a particularly riveting aspect of putting together a financial plan, but spending just a little bit of time today to make sure you're adequately covered really could make the difference between just having a bad day and a bad decade over the course of your life.

Robert Brokamp: Very well said, Amanda. Thank you so much again for joining us, and thank you, dear Fool listeners, for spending part of your weekend with us, and appreciation as always to Bart Shannon, the engineer for this episode.

Keep in mind that people on the program may have interest in the investments they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell investments based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. I'm Robert Brokamp. Fool on, everybody.

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All You Need to Know about Insurance to Protect Your Income and Wealth was originally published by The Motley Fool