I Dropped My Umbrella Policy for Spotify Premium …and Here’s Why!Submitted by Dorval & Chorne on July 10th, 2018
By Keagan Kinsella | Tuesday, July 10, 2018
If you have read my previous blog, The Only New Years Resolution You Really Need, you might remember the focus our advisor group places on making financial decisions from a quality of life standpoint. We believe this quality of life decision making process is a great habit to develop as a young adult having to make really tough decisions for the first time on our own. I think it might help if I tell you the story of how I wound up with an umbrella insurance policy, dropped it, and why I think it’s a good lesson for other people who might find themselves in a similar position someday.
It all began when I bought my own home and moved out of my parents’ house (gulp). Big step—no more free rent, magically-stocked fridge, or best-roommates ever (THEY made me say that). Turns out rent (now mortgage) and groceries are not the only expenses that come along with “adulting.” Car insurance and homeowner’s insurance are also wonderful little extras (with big price tags!). I talked to our family’s local agent to get set up with policies under my own name. He was very helpful and provided me with quotes. However, there was a line item on the bottom of the page which read: “Umbrella policy: $93.00/year,” which was not bad at all compared to my auto insurance, but still buys a lot of Chipotle! My agent told me anytime you are living on your own, it is important to have this additional coverage in order to protect my assets and future earnings (which could be sought in a lawsuit). I questioned if I really needed this coverage at this stage of my life, but my agent seemed pretty convincing, and he said bundling with my home/auto would help my rates…so, I agreed.
To back up a bit, you might be wondering what in the world is an umbrella policy? Well, for starters, it does not have anything to do with protection from the rain or fancy little decorations in frozen drinks. In fact, it is much more…boring. Basically, umbrella insurance is extra liability insurance. It goes above and beyond your auto and home coverage to help protect against large claims and potential lawsuits. Sounds great, right? Well, I’ll let you decide.
Fast forward a month, and I received my first umbrella policy bill in the mail (yes, getting the mail when you have your own house is much less exciting when it consists of bills/junk/etc…why do care packages have to end after your freshman semester in college?!). When I opened the bill, the line item now read, “Umbrella policy: $187.00/year.” My eyes opened wider…more than double the cost I was originally quoted?! Long story (not so) short, my agent thought I was older than I actually am and premiums go down as you get older. His explanation was he just assumed I was older since I was buying a house (not sure about that logic?).
After talking with some other people about the true purpose of umbrella insurance, the most impactful advice I received was, “an umbrella policy is a no-brainer for anyone with young kids and/or significant assets. You have neither…so an umbrella policy would be an extravagance that might be fine for you to have, but only if the premium is extremely low.” I don’t know about you, but for me, I can think of dozens of better ways to spend $187.00 per year rather than paying premiums for an unnecessary insurance policy. I decided to cancel my policy, got a refund of my premium, and used that money to sign up for Spotify premium instead!
Some of you music lovers may be able to relate to my thought process here, but basically, I had been listening to Spotify commercials for what feels like ages…and they’re the absolute worst (first-world problems, I know). Advertisements always tout how you can get ad-free Spotify Premium, with all its perks, for $10.99/month. The frugal and practical part of my brain always told me, “They’re just commercials, you’re fine.” But, once I cancelled this umbrella policy, I thought treating myself to the upgraded version of one of my favorite apps was a perfect way to spend that money in a way that would add much more personal quality of life.
If you take away nothing else from this story besides what an umbrella policy is (and that insurance salespeople can be really smooth talkers), I want you to remember the idea there are a lot of times in life, and especially finances, when you will be sold things, or just expected to purchase items that you may not even know why you are obtaining them. It could be people telling you to get an umbrella insurance policy, contribute X% to your 401k, buy a house instead of renting, or even to cook more at home instead of going out to eat so much. But what really matters are the reasons behind why you are making the decision. The voices of peer pressure are so much stronger when we are young and trying to figure out life. If you never start looking at these kind of decisions objectively based on your own personal values and priorities, you will live your life in a continual spiral of following what “they say” to do. In fact, we see this all the time even with older clients who come in and show us a life insurance policy which they no longer need, but are still paying sizeable monthly premiums. When we ask them why they have it, they usually say something to the extent of, “Well, we don’t know. It’s what the insurance person sold us.”
I don’t know about you, but after all this, the only umbrella I want to talk about is one propped up on the beach… or even better, that fruity cocktail with a paper umbrella gracing the top! Yes, there will come a time and place where my need for that kind of insurance will definitely be a priority, but that time is not today. So I encourage you to follow my lead, and think twice about the things you find yourself “expected” to do, whether it be from friends, family, or even sales people. Remember it’s called personal finances for a reason, and you should take the power to express your own personal judgement and spend your money in ways you believe will best create the life you desire. As for me, you’ll never find me listening to another obnoxious Spotify commercial again…now that’s quality of life!